GSK buys Novartis out of consumer healthcare venture

GSK will pay US$13bn to take full control of its consumer healthcare venture with Novartis.

The deal to buy Novartis’ 36.5% stake in the business, which owns brands including Sensodyne toothpaste and Panadol painkillers, will help GSK remove uncertainty when it comes to planning future spending. The venture formed in 2015 combined GSK’s consumer healthcare business and Novartis’ over-the-counter business. The terms of the deal empowered Novartis to require GSK to buy its stake at any time from March 2018 to 2035.

Emma Walmsley, CEO of GSK, said: “For the group, the transaction is expected to benefit adjusted earnings and cash flows, helping us accelerate efforts to improve performance. Most importantly it also removes uncertainty and allows us to plan use of our capital for other priorities, especially pharmaceuticals R&D.”

Novartis CEO Vas Narasimhan said the time is right for the company to sell a non-core asset at an attractive price as the Swiss major continues its strategy of building a medicines company “powered by digital and data”.

The sale of its stake in the venture – which had sales of £7.8bn in 2017 – comes amid a wider restructuring of the consumer healthcare market. Last week, Pfizer’s sale of its own consumer healthcare business stalled as GSK became the latest player to rule itself out of the running. Reckitt Benckiser had pulled out just days before and Johnson & Johnson had walked away in January.

GSK announced in July last year that it wants to sell its Horlicks business. In an update today, the firm said it is initiating a strategic review of its Horlicks and other consumer healthcare nutrition products to support the funding of its purchase of the Novartis stake. The sale would also help increase its focus on its over-the-counter and oral health products, though GSK added that while there can be no assurance that the review process, which is set to conclude by the end of the year, will result in a sale.