GSK Is Now Favorite to Acquire Pfizer's Consumer Health Business

GlaxoSmithKline may have an easier path to acquiring Pfizer Inc.’s consumer health business after a rival suitor walked away from making a deal with the pharma giant.

Reckitt Benckiser Group, a British consumer good group, ceased its discussions with Pfizer this week over a deal to potentially acquire that division, which is valued at more than $15 billion. Reuters reported that Reckitt walked away Wednesday, one day before Pfizer was expecting binding offers on the consumer health division. GSK is working on a bid proposal, Reuters said, citing sources familiar with the matter.

In October 2017 Pfizer Chief Executive Officer Ian Read announced that the company could sell off its consumer division, which has some well-known brand names including Advil, Robitussin, Chapstick lip balm and Preparation H. In 2016 Pfizer’s consumer division brought $3.4 billion of revenue into Pfizer’s coffers. At the time Pfizer announced it could sell off the division Read said the consumer division was a strong connection between consumer products and the company’s biopharmaceutical businesses it was also distinct enough that "there is potential for its value to be more fully realized outside the company."

Reckitt was not seeking to acquire the entire Pfizer division. Reuters said the British group was seeking part of Pfizer’s consumer unit, but few details were available as to that group’s plan. By walking away from the deal GSK now has a clearer path forward should it make a bid.

In January GSK Chief Executive Officer Emma Walmsley told reporters that she would "have a look" at the Pfizer unit during an interview at the annual J.P. Morgan Healthcare conference in San Francisco. During that January interview, Walmsley said her company’s top focus would continue to be its pharma business. At J.P. Morgan Walmsley said the company did not need the Pfizer unit but said if she did make a move to acquire the consumer unit, her company would not overpay.

While acquiring Pfizer’s consumer unit would expand GSK’s annual earnings, analysts have suggested that an acquisition of that magnitude would stretch the company’s finances, Reuters noted.

While most likely unrelated to a potential bid for the consumer unit, GSK has been cutting costs where it can. On Wednesday BioSpace reported that GSK was moving to cut the budget of its pharmaceuticals division by 20 percent. The strategy would impact the company’s sales and marketing programs by having those assets focus on new products that are considered key drivers.

Following the decision by Reckitt to withdraw from a potential deal with Pfizer, the U.S.-based pharma giant issued a statement that said the company will continue to "evaluate potential strategic alternatives for the consumer healthcare business." Alternatives could include a spin-off, sale or a decision to retain the business, Pfizer said in its announcement. The company did say it intends to make a decision regarding the business unit this year, Reuters noted.

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