GlaxoSmithKline PLC and Pfizer Inc agreed to combine their consumer healthcare businesses in a joint venture controlled by the British pharmaceutical giant, paving the way for it to split into two companies.
Glaxo is to hold 68 percent of the new entity, which would have combined sales of US$12.7 billion.
The UK drugmaker said it plans to list the new business on the stock market within three years.
Glaxo shares surged as much as 5.7 percent in London trading, the most since March.
The transaction creates the world’s biggest supplier of over-the-counter medicines with brands of painkillers such as Advil and Panadol, and marks a shift from CEO Emma Walmsley’s stated strategy of keeping the steadily performing consumer and vaccine businesses under the same roof as the more volatile pharma operations.
The company yesterday said the deal sets a foundation to create two companies — one focused on pharma and vaccines, and the other on consumer health.
Glaxo, Pfizer and others are grappling with surging research costs to develop new medicines even as insurers and governments demand lower prices for the finished product. A separation would help focus resources on separate businesses with different needs.
Walmsley has been working to revitalize a lackluster pipeline of new drugs at Glaxo, culling programs to focus on those that look most likely to succeed and bringing in industry veteran Hal Barron to oversee research.
Earlier this month, Glaxo agreed to buy drugmaker Tesaro Inc for US$5.1 billion, expanding in cancer medicines for a price analysts deemed high.
The deal follows a move by Glaxo earlier this year to pay US$13 billion for Novartis AG’s stake in a consumer joint venture.
The enlarged company is to operate under the name GSK Consumer Healthcare and the Glaxo unit’s existing CEO, Brian McNamara, and its chief financial officer, Tobias Hestler, would assume those roles in the joint venture.
The transaction is expected to close in the second half of next year. After that, Pfizer said it plans to deconsolidate its share of the business, which might boost its operating margins.
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