Haleon: The 'Abandoned Heir' of Pfizer and GSK – Where Do the Spin-Offs Go After $25 Billion in Share Sales?

Mar 25, 2024 20:23 CST Updated 20:23

GSK

Pharmaceutical R&D Manufacturer

If the "symbiotic relationship" is no longer suitable, then separate to pursue "wishes coming true." In recent years, the new favorites spun off by MNCs have each "become kings in their own right."

Writing | QsherRunyu

Editor | Fang Chen

Pfizer has also started to sell its Haleon shares.

Recently, according to media reports,Pfizer Plans to Sell 630 Million Shares of British Consumer Healthcare Company Haleon, Valued at Approximately £2 Billion (RMB 18.2 Billion), Haleon to Repurchase Around £315 Million Worth of Shares from Pfizer.As the largest shareholder of Haleon, Pfizer previously held a 32% stake. Following this sale and buyback, Pfizer's stake in Haleon will decrease from 32% to approximately 24%.

In fact, the fate of Haleon was not sudden, as the groundwork was laid in earlier spin-offs. Behind this is not only Pfizer's reduction in its stake,Another major related giant, GSK, has also been continuously selling shares since the spin-off, gradually clearing the remaining battlefield.。

The reason behind this is also clear. In the past two years, it has become common for large pharmaceutical companies to spin off their consumer health businesses. Unlike a decade ago, pharmaceutical giants are no longer relying on massive mergers and acquisitions or aggressively expanding their territories. Instead, they are choosing to divest businesses that are not strongly related to their core operations, aiming to achieve mutual success with a more relaxed approach.

Since the split key was pressed, these "noble newcomers" who are eager to develop independently from their parent companies have officially embarked on a new battle to maintain their positions. In this new round of competition, what is the current development situation of the split companies? And what new challenges do they face?

Haleon's Solo Journey

Haleon has been independently listed for less than two years, but its two major shareholders, GSK and Pfizer, have successively sold their shares. This is actually just a step in GSK and Pfizer's predetermined "exit" plan.

This can be traced back to the origin of Haleon, which has deep ties with two giant companies. It was formed in December 2018 through the merger of the consumer healthcare divisions of GSK and Pfizer.At that time, GSK held 68% of the shares, and Pfizer held 32% of the shares.In a sense, Haleon was born with a silver spoon in its mouth.

However, with development, Haleon has met a fate similar to the consumer health businesses of most multinational pharmaceutical companies—being spun off.

In July 2022, Haleon was officially spun off and subsequently listed on both the London Stock Exchange and the New York Stock Exchange, successfully completing its solo journey. This spin-off also became one of the significant corporate changes for GSK in the past 20 years, with the post-spin-off GSK focusing on pharmaceuticals and vaccine businesses.

Since its independence, one of the main topics surrounding Haleon has been — how is Haleon performing in terms of independent growth?

HaleonUnder its umbrellaIncluding Caltrate, Centrum, Sensodyne, Fenbid, Voltaren, Contac, Bactroban, Flixotide, Polident and a series of products.Product.From the overall financial report data,GSK's performance is in line with expectations, achieving two consecutive years of revenue and net profit growth. According to the recently disclosed full-year results for the first time after the spin-off,Haleon's revenue in 2023 was £11.3 billion, a year-on-year increase of 4.1%; adjusted operating profit was £2.549 billion, a year-on-year increase of 10.4%.。

But against the backdrop of a generally unfavorable environment, Haleon also faces some common challenges after becoming independent. Last July, on the occasion of the first anniversary of Haleon's independence, The Guardian reported,Haleon Plans to Cut Thousands of Jobs Globally to Save Costs, including hundreds of job cuts in the UK.

This point is also reflected in the latest financial report. Haleon emphasized that its three-year "Productivity Plan" is on track, achieving a balance between efficiency and greater flexibility. Through this initiative, the plan is expected to save a total of 300 million pounds in costs annually, with particularly significant benefits expected in 2024 and 2025.

Setting aside performance issues, another controversial topic surrounding Haleon is — with the two major shareholders continuously reducing their stakes, will Haleon ultimately become the "abandoned one"? What lies ahead for its fate?

In fact, the development of the incident was not unexpected, and it has not yet reached the end.

As early as the beginning of 2022, Pfizer revealed plans to divest its 32% stake in Haleon "in a disciplined manner." In May of last year, Pfizer reiterated its intention to reduce its equity stake "slowly and methodically" in the coming months. Thus, this sale of shares is merely a step in the predetermined plan. GSK has been actively reducing its stake in Haleon, transitioning from being the largest shareholder to holding a smaller stake than Pfizer, and now owns less than 10% of the company.

The path behind is also clear. At the time of deciding to split, GSK and Pfizer made it clear that they wanted to make great strides in the pharmaceutical field, and planned to completely divest Haleon financially, becoming a more pure pharmaceutical company.This is in line with its own strategic needs.Moreover, due to market expectations and the support of its performance, this did not bring a fatal negative impact on Haleon's stock price.。

This also determines that Pfizer's sale of its stake in Haleon is not yet at an end, and the continuous divestment will persist, clearing the past battleground.

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"The New Battleground for the 'Abandoned Youngsters'"

If it is no longer suitable for a "symbiotic relationship," then separate, each pursuing their own "dreams come true," seeking higher profits and maximum value.

The previous round of competition has ended, and a new round of battles among MNC giants has already geared up. In the past five years, Pfizer, Merck, Johnson & Johnson, GSK, Sanofi, Bayer, and others have shown particularly frequent signs of spin-offs or restructuring. In 2024, the collective keywords in the strategies of multiple MNCs are BD (Business Development) and M&A (Mergers and Acquisitions), but the logic behind M&A has undergone a complete transformation, with the aim no longer being scale-driven.But with technological innovation as the underlying logic, increase flexibility, simplify operational models, optimize capital structures, and improve financial conditions, focusing on their respective growth strategies.。

And almost every company that has "sold itself" to an MNC has become a leader in creating new biotech therapies or tools.

As MNCs enter a new phase of competition, correspondingly, those companies that have been gradually spun off or divested are also entering a new stage of development.

A closer look at the financial reports of these companies that have regained independent operating space reveals that the majority have achieved or even exceeded expectations, making steady progress while maintaining stability. Their true value is being reasonably assessed. In fact, many of these companies, which were acquired by multinational corporations (MNCs) during the last wave of "land-grabbing," have decades or even centuries of accumulated experience. As a result, after the spin-offs, some companies have quickly seized dominant positions in niche markets by formulating new strategies based on their strong resource endowments, establishing themselves as leaders in their respective fields.

Haleon,GSK, Alcon, and Organon are representatives that have shown outstanding performance after being spun off in recent years. Looking further back, AbbVie, now one of the top ten MNC giants, was also spun off from Abbott Laboratories.

Not only did Haleon's adjusted operating profit in 2023 increase by more than 10% year-over-year, but the independent company formed after Johnson & Johnson's consumer health business spin-off also went public.GSK"After gradually beginning its fully independent operations, its first annual report also showed relatively good performance. The financial report data indicates that in 2023,GSKNet sales reached 15.444 billion US dollars, achieving organic growth of approximately 5%.

In 2023GSKThis year marks a pivotal year of transformation, with a successful listing on the NYSE in May, raising nearly 4 billion US dollars in total, becoming the largest IPO in the US stock market since November 2021.

China,GSKBegin to focus on pursuing profit growth, long and stable cash flow, and reasonable capital allocation.

Then in 2024,GSKWill formulate clearer, more focused strategic priorities to a greater extent, leveraging its own brand advantages.In 2023,GSKIt owns approximately four $1 billion super brands and 20 brands with over $150 million, many of which are household names such as Band-Aid, Listerine, Neutrogena, and Tylenol. Previously, after separating from Johnson & Johnson,GSKPlans to operate in more than 100 countries.

For Johnson & Johnson, 2023 marks a critical turning point as the company divests itself of its "burden."

In 2023, Johnson & Johnson achieved its comprehensive financial and strategic goals as planned. In March of that year, Johnson & Johnson announced for the first time a restructuring plan involving its orthopedics business, initiating actions such as layoffs; in August,GSKLaunch fully independent operations; In September, Johnson & Johnson announced a brand update, integrating its medical technology and pharmaceuticals businesses under the Johnson & Johnson name, with the pharmaceutical division Janssen being renamed as Johnson & Johnson Innovative Pharmaceuticals.In its operations, Johnson & Johnson has efficiently "renewed" itself and is now focusing more energy on strategically strengthening its solid tumor sector and introducing innovative products in therapeutic areas with competitive advantages.In 2024, Johnson & Johnson's top priority is to become more focused and pursue higher profit margins.

In 2024, the trend of multinational pharmaceutical companies spinning off will continue.

Sanofi's "Play to Win" strategy will continue to attract attention. Among the two major initiatives, one is to evaluate the possibility of spinning off the consumer healthcare business, which would allow the company to focus more on innovative drugs and vaccines after the spin-off. Based on this, this year may witness the birth of another “born in Rome” giant in the pharmaceutical industry. Recently, media reports suggest that Blackstone and Advent International are considering acquiring Sanofi’s consumer healthcare business unit, with a potential acquisition amount reaching up to $20 billion.

Another MNC that left悬念 is Bayer.

When Bill Anderson, CEO of Bayer, released the Q3 financial report last year, he mentioned during the earnings call that they would consider spinning off the consumer health or crop science division. However, recently, the CEO of Bayer seemed to indicate in a statement that the top priority for 2024 is to address challenges, boost performance, and enhance strategic flexibility, and there will be no business spin-offs for the time being.

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