pounds 682m Glaxo disposal chips at debt mountain

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The Independent Online
NIGEL COPE

Glaxo Wellcome is off-loading another unwanted chunk of the old Wellcome empire with the sale of Wellcome's cough and cold cure interests to Warner Lambert of the United States for $1.1bn (pounds 682m).

The drugs giant is selling its stake in the Warner Wellcome joint venture, which includes the cough mixtures Actifed and Sudafed, as well as the analgesic, Calpol. However, the deal does not include medicines such as Beconase hay-fever treatment and Zovirax cold sore cream.

The deal is the latest in a string of cuts at Wellcome. It follows the decision in June to close Wellcome's research and development facility in Beckenham, Kent, which employed 1,500 staff. In September it announced a pounds 1.2bn cost-cutting programme that would mean the loss of 7,500 jobs.

Of these, 1,700 will go in the UK. A further 1,000 will be lost from the group's research and development facilities by 1998.

Yesterday's sale will reduce Glaxo's debt mountain, which stood at pounds 3.5bn following the pounds 9bn acquisition of Wellcome in March. It is expected to pay down the debt a year earlier than forecast and be cash-positive by the end of 1998.

Steve Plag, pharmaceuticals analyst at NatWest Securities, said: "It's a good deal because it pays down debt and gets rid of seasonal products that were in mature markets."

Glaxo Wellcome said: "It shows we are focusing on developing prescription medicines, and also developing medicines when they come off prescription and become available over the counter."

Sir Richard Sykes, chief executive, said the new structure represented a "simplified relationship" that would enable the company to concentrate on research-based prescription products.

Wellcome had signed a joint venture agreement with Warner Lambert in 1993 under the name Warner Wellcome Consumer Healthcare. The deal included brands such as Listerine and Sinutab.

Glaxo had signed a similar joint venture with Warner Lambert a year earlier. The agreement covered brands such as the Zantac heartburn relief treatment. Glaxo's share of Warner Wellcome's pre-tax profit was pounds 38m last year. Its share of net assets stood at pounds 23m.

Glaxo Wellcome's shares fell 7p to 878p yesterday. The company will continue to manufacture OTC products at its manufacturing sites to meet existing contracts with Warner Lambert. These agreements last until 1999.

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