Pharmaceuticals giants GlaxoSmithKline and Pfizer will merge their healthcare businesses to create the world’s biggest supplier of over-the-counter medicines, including brands such as Panadol, Anadin and Voltarol.
The new joint venture will have revenues of around £9.8bn. It also paves the way for GSK to split into two businesses; one selling over-the-counter medicines, the other researching new pharmaceuticals and vaccines.
The news pleased investors, sending GSK’s share price up 7 per cent on Wednesday morning. Shareholders have pressed the company to split for years, believing there are greater benefits to having two companies, each focused on one area, than a diversified group.
However, the split will impact jobs, Glaxo chief executive Emma Walmsley conceded, without giving details.
“Obviously there’s going to be some impact on people,” Ms Walmsley said.
“That’s something we are working through and we will certainly be talking to our employees before we start talking about that in any way publicly.”
British-based Glaxo will own 68 per cent of the joint venture, while US-based Pfizer will own the remaining 32 per cent. The companies plan to list the new joint venture within three years.
George Salmon, equity analyst at Hargreaves Lansdown, said the decision to split had come as a surprise.
He said: “The separation will take away the steady cash flows of the consumer business, meaning there’s more pressure on the men and women in white coats to deliver the next generation of blockbusters.
“However, the potential to shift significant amounts of debt onto the cash-generative consumer business should take the strain off the balance sheet, and thus buy valuable time for the pipeline to deliver.”
He added: “There’s also the fact that as a specialist pharma group, investors can be more confident GSK can get better results from the labs.”
Both Pfizer and GSK are battling against the surging cost of researching new drugs as healthcare providers demand lower prices.
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