Stocks in Focus: GlaxoSmithKline

Thursday 4 July 2019

This week NW Brown look at the UK multinational pharmaceutical company GlaxoSmithKline (GSK).

In December 2018, GSK announced that an agreement had been reached with Pfizer, an American pharmaceutical company, to combine their consumer health businesses into a new joint venture. The merger, which is subject to anti-trust approval, will result in GSK holding the controlling interest of 68 per cent.

The 9.8bn joint venture will incorporate some of their leading consumer healthcare brands including GSK's Sensodyne, Voltaren and Panadol and Pfizer's Advil, Centrum and Caltrate. Moreover, it will provide the opportunity to deliver stronger sales, cash flow and earnings growth. This is expected to be partially driven by cost synergies across the brands, which are projected to generate total annual cost savings of 0.5bn by 2022.

The merger supports GSK's strategy to strengthen its pharmaceuticals business over the next few years. The intention is to eventually de-merge GSK Consumer Healthcare into a separate business so that investment can be focussed on its pharmaceutical pipeline.

Although approval is still outstanding, management have recently begun to restructure the media, marketing and digital segments in preparation of the merger. Senior leader appointments have already begun to be made, although this will not formally take place until the proposed joint venture completes. Tamara Rogers, head of EMEA has now taken over from Carlton Lawson, who was head of global categories and chief marketing officer, to lead eight new heads within the consumer healthcare business. Four further new global marketing leaders have also joined this team to focus on future growth strategies.

Subject to approval, the transaction is expected to complete in the second half of 2019.

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