Two of the biggest pharmaceutical companies in the world are resting on the verge of a merger that will result in combined sales of almost $13 billion per year. These two companies are GlaxoSmithKline and Pfizer. In the merger, GlaxoSmithKline will merge its consumer health business with Pfizer in a 68/32 equity holdings split. The pair of companies claims that this joint market share will better help them to surpass major industry rivals like Bayer, Sanofi, and Johnson & Johnson.
To put this into perspective, these are the two drug companies who own brand-name households health care products like Advil and Tums. You may also recognize Pfizer’s top-selling brands—Centrum and Caltrate—and GSK’s top brands like Nicorette and Excedrin.
British-headquartered GSK also made it known of their plan to split into two companies after the merger. This will lead to a spinning-off of the new consumer healthcare arm, to be listed in London within the next three years. GSK, however, said they will continue to focus operations on developing prescription medications and vaccines.
Pfizer, on the other hand, has been quite openly looking to shed its consumer healthcare business. As a matter of fact, last year the company said it would consider an outright sale of this business or spinning it off as a separate stock. Pfizer’s core prescription drugs unit is the company’s bread-and-butter, particularly with juggernaut products like the cholesterol medication Lyrica and the erectile dysfunction medication Viagra.
It might be worth noting that this is actually GSK’s second big deal in the last few weeks. You may recall that GSK just sold most of its nutrition business in India to Unilever, in a deal worth approximately $4 billion. This portfolio includes the popular health drink brands like Boost and Horlicks.
GSK has also announced a plan to invest $300 million in the consumer genetics company 23andMe in an effort to establish a four-year collaboration to discover medicines that can be derived from 23andMe’s genetic database. Then, just a few weeks ago, GSK announced its plan to buy Tesaro for $5.1 billion. Tesaro develops various cancer treatments.
At the end of the day, GSK hopes to save about $632 million by 2022 because of this merger, with a plan to reinvest 25 percent of the cost savings from this deal into new innovations for the future.