- The large drugmaker Pfizer is spinning off some of its best-known brands, including Advil, ChapStick, Robitussin and Emergen-C
- The Wednesday announcement is part of a new partnership with United Kingdom-based drugmaker GlaxoSmithKline
- The move, part of an industry-wide trend, will put more emphasis on the companies’ more unique, complex medicines
The large US drugmaker Pfizer will be spinning off some of its best-known products, including Advil, ChapStick, Robitussin and Emergen-C, as part of a new partnership with UK pharmaceutical company, GlaxoSmithKline.
The two companies are combining their consumer health units, which brought in nearly $13 billion in sales last year, in an all-equity deal, and plan to later make the combined entities an independent company, they announced on Wednesday.
The products involved in the deal are familiar pharmacy names, sold over-the-counter, meaning no prescription is necessary.
But that may well be part of the point: The shift will put more of a focus on the companies’ other medicines, including more unique, complex prescription drugs, which have higher margins.
Pfizer, for example, has sought to emphasize its pipeline of new medicines in development, projecting up to 15 potential blockbuster approvals between 2017 and 2022, including five cancer drugs.
The drugmaker has also been trying to sell its consumer health unit since last year, and announced in July a reorganization to separate the business out from other units, including its “science-based Innovative Medicines business.”
Critics have also called on GlaxoSmithKline to sell its consumer health business for years, without any luck, Hargreaves Lansdown analyst George Salmon 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,” Salmon said about GlaxoSmithKline. But the company can also shift “significant” debt onto the consumer business, “and thus buy valuable time for the pipeline to deliver.”
The deal is also part of a growing industry trend. Bristol-Myers Squibb announced on Wednesday that Taisho Pharmaceutical Holdings had put in a $1.6 billion offer for its consumer health unit, UPSA, which operates in France, Europe and other countries.
These moves mark “diversified big pharma companies narrowing their business focus, by exiting consumer-driven markets, such as consumer health, animal health, eye-care, simple generics or dermatology, to finance investments in innovative drugs,” according to a new Fitch Ratings note.
Other drugmakers with similar stragies include Novartis, Bayer, Eli Lilly and Merck, according to Fitch.
Combined, the Pfizer and GlaxoSmithKline consumer health units are expected to dominate the space, with 7.3% of the global over-the-counter market, the largest share, and the top or second-best market shares in the U.S. and all other key areas, according to a financial filing.
The joint venture will additionally include Pfizer’s heartburn medication Nexium 24HR and the multivitamin Centrum, a Pfizer spokesperson said, and GlaxoSmithKline’s sensitivity toothpaste Sensodyne, anti-inflammatory product Voltaren and the pain reliever Panadol.
It won’t include Pfizer’s Viagra Connect product, which is sold over-the-counter in the United Kingdom, or other Pfizer over-the-counter medications like Diflucan, Feldene, Ponstan, Pivalone, Sab Simplex, Ibupirac, Gelucil, Becosules and Corex, according to the Pfizer spokesperson.
The United Kingdom-based GlaxoSmithKline will have a majority interest in the new venture, or 68% in equity, while Pfizer will own a smaller, 32% stake, with the right to a portion of earnings and dividends. The deal is expected to close in the second half of next year.
GlaxoSmithKline plans to spin the combined units off into an independent, publicly-traded company within five years of the deal closing, though it can decide whether to do so and when, according to the press release.