GlaxoSmithKline plc and Pfizer Inc to form consumer healthcare joint venture

GlaxoSmithKline plc and Pfizer Inc have reached an agreement to combine both their consumer health businesses. The two companies will form a new ‘world-leading joint venture,’ with total combined sales of about $12.7 billion (£9.8 billion).

GlaxoSmithKline (GSK) will have a 68% controlling equity interest while Pfizer’s equity interest will be 32%.

GSK says that the proposed all-equity transaction represents an opportunity to build on the recent acquisition of Novartis’ stake in GSK Consumer Healthcare.

In a press release, GlaxoSmithKline added:

“The proposed transaction also supports GSK’s key priority of strengthening its pharmaceuticals business over the next few years by increasing cashflows and providing an effective pathway through the separation of GSK Consumer Healthcare to build further support for investment in its R&D pipeline.”

A joint venture is a partnership between at least two parties with each one contributing capital and assets. Joint ventures may involve companies, people, and even governments.

GSK and Pfizer bosses - consumer healthcare joint venture image
GSK boss Emma Walmsley (left) and Pfizer boss Ian Read (right). (Images: Emma Walmsley – Ian Read –

Consumer healthcare joint venture

The new joint venture will be in a good position to deliver greater sales, earnings growth, and stronger cash flow. Category-leading power brands, substantial cost synergies, and science-based innovation will lead to greater sales and profits.

The joint venture will bring together two highly-complementary portfolios of famous consumer health brands. GSK has, for example, Sensodyne, Panadol, and Voltaren, while Pfizer has Centrum, Advil, and Caltrate.

According to GSK:

“The Joint Venture will be a category leader in Pain Relief, Respiratory, Vitamin and Mineral Supplements, Digestive Health, Skin Health and Therapeutic Oral Health. The Joint Venture will be the global leader in OTC products with a market share of 7.3% ahead of its nearest competitor at 4.1% and have number 1 or 2 market share positions in all key geographies, including the US and China.”

Consumer healthcare joint venture – GSK statement

GSK CEO, Emma Walmsley, said:

“Eighteen months ago, I set out clear priorities and a capital allocation framework for GSK to improve our long-term competitive performance and to strengthen our ability to bring new breakthrough medicines and better healthcare products to people around the world. We have improved our operating performance and have set out a new approach to R&D.”

“We have also started to reshape the Group’s portfolio through prioritisation of R&D programmes, acquisitions such as that proposed with the oncology biopharmaceutical company, TESARO, the minority buy-out of the consumer healthcare business and a series of non-core product divestments.”

“The transaction we have announced today is a unique opportunity to accelerate this work. Through the combination of GSK and Pfizer’s consumer healthcare businesses we will create substantial further value for shareholders. At the same time, incremental cashflows and visibility of the intended separation will help support GSK’s future capital planning and further investment in our pharmaceuticals pipeline.”

Consumer healthcare joint venture – Pfizer statement

Ian Read, Pfizer’s Chairman and current CEO, said:

“We are pleased to announce this new joint venture for Pfizer Consumer Healthcare, delivering on our commitment to complete the strategic review for this business in 2018.”

“Pfizer and GSK have an excellent track record of creating successful collaborations, and we look forward to working together again to unlock the potential of our combined consumer healthcare businesses.”