GSK and Pfizer merge consumer healthcare businesses

GSK and Pfizer are merging their consumer healthcare businesses in a move that will create a market-leading joint venture.

The merger will create a business with combined global sales in 2017 of £9.8bn (US$12.4bn), bringing together brands that include GSK’s Sensodyne toothpaste and Panadol pain relief, with Pfizer’s Centrum multivitamins.

It brings to close a turbulent year for CEO Emma Walmsley, who has struck numerous deals aimed at refocussing GSK on developing new prescription drugs. Within three years of closing the GSK-Pfizer merger, GSK, which will own 68% of the new business, will split off the venture and list it as its own company. It will be a global leader in over-the-counter (OTC) products with a market share of 7.3% compared to its nearest rival at 4.1%, the companies said in a statement. It will also have a number one or number two market share position in the US, Europe, China, India and Australasia.

Walmsley said the deal will accelerate her priorities to refocus GSK: “Incremental cashflows and visibility of the intended separation will help support GSK’s future capital planning and further investment in our pharmaceuticals pipeline.

“With our future intention to separate, the transaction also presents a clear pathway forward for GSK to create a new global pharmaceuticals/vaccines company, with an R&D approach focussed on science related to the immune system, use of genetics and advanced technologies, and a new world-leading consumer healthcare company.”

GSK had been in the running to buy Pfizer’s consumer healthcare business, but pulled out in March. This was shortly before GSK announced that Novartis, its partner in its own consumer healthcare venture, had triggered a clause forcing GSK to pay US$13bn to purchase the Swiss major’s 36.5% stake.

GSK agreed earlier this month to sell Horlicks and other consumer healthcare nutrition products to Unilever for £3.1bn after announcing it was looking for a buyer back in July. The money will be used to fund the strengthening of its prescription drug R&D pipeline. Furthermore, it announced on 3 December it had agreed to pay £4bn to buy oncology-focussed biopharmaceutical company TESARO to strengthen its pharmaceutical activities.

The merger with Pfizer is expected to generate annual cost savings of £500m by 2022. The deal, which is subject to approvals, is expected to close in the second half of next year.