Novartis Bought Out by GlaxoSmithKline in Shake Up of Consumer Healthcare

GlaxoSmithKline is buying out Novartis from their joint venture in consumer healthcare for $13 billion and will take full control of all products including Panadol pain relief tablets, Sensodyne toothpaste, Nicotinell patches and Voltaren muscle gel.

GSK’s largest move since CEO Emma Walmsley took the reins last year follows the Britain-based drug maker’s announcement last week to end its attempt to acquire the consumer healthcare business of Pfizer, endangering the auction the U.S. based company was hoping would attract as much as $20 billion.

Remedies for consumers available over the counter have lower margins when compared to prescription drugs, but are typically well-known and long lasting brands that have loyal customers.

The just announced transaction addresses an important capital allocation priority and allows shareholders of GSK to capture the complete value of one of the leading businesses in the world of consumer healthcare, said Walmsley in a prepared statement Tuesday.

Although certain pharmaceuticals group are keen on holding onto products of consumer care, an intense competition in prices online, mainly by Amazon, along with less expensive products that are store-brand, have led many others to doubt stable return over the long term.

Shares of the British group were up 4.5%, which outperformed the gain of 1.8% in the STOXX Europe 600 Healthcare.

Along with ending its venture with Novartis, GKS announced that it would begin a review of Horlicks as well as other nutrition products, which sparked another possible shake-up in the industry. This review is going to include the assessment of its shareholding of the Indian subsidiary.

Walmsley added that the deal of buying out Novartis also will remove any uncertainty and allows GSK to play its use of capital for other places, especially R&D for pharmaceuticals.

Pfizer has struggled in its attempt to sell its business of consumer healthcare since Reckitt Benckiser and GSK both pulled out of the bidding. Differences in expectation of price have hurt Merck KGaA in its attempt to sell its unit of consumer products.

The call for bids by GSK for its nutrition brands from consumer healthcare, with regional focus pointed at India, will likely detract attention from the asset of Merck, which relies a great deal on dietary supplement and vitamin sales in different emerging markets.

Analysts at Deutsche Bank say the sale by Novartis of its share of the joint venture declutters its portfolio, but did caution the Swiss group remained very vague with its plans for its new found cash.

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