GSK and Pfizer File Prospectus for Global Consumer Healthcare Joint Venture Ahead of Planned UK Listing

Yesterday (December 19), two multinational pharmaceutical giants, Pfizer and GlaxoSmithKline (GSK), announced that they would merge their respective consumer healthcare businesses into a joint venture, with GSK holding a 68% stake and Pfizer holding a 32% stake.

Based on the 2017 performance of the two companies’ consumer healthcare businesses, the joint venture achieved sales of $12.7 billion (approximately RMB 87.582 billion), capturing a 7.3% share of the global market. This figure far exceeds that of its closest competitors—Johnson & Johnson, Bayer, and Sanofi—each of which holds a market share of around 4%, indicating that this merger has created a behemoth in the consumer health sector.

The merger is expected to be completed in the second half of 2019. Following the completion of the merger, GSK plans to spin off this joint venture into an independent company listed in the UK.

Regarding the rights of both parties, under the terms of the transaction, Pfizer will hold a 32% equity stake, thereby entitling it to share proportionally in the joint venture’s profits and dividends, which will be paid on a quarterly basis. Pfizer will have the right to appoint three of the nine members of the joint venture’s board of directors. As for GSK, within five years from the closing of the proposed transaction, GSK will have the sole discretion to determine whether and when to initiate a spin-off and initial public offering (IPO), and may also sell all or part of its shareholding in the joint venture upon its listing.

It is also understood that the product portfolio of the joint venture will cover GSK’s Sensodyne toothpaste, Voltaren (anti-inflammatory and analgesic),Panadol(antipyretic analgesics), as well as Pfizer’s Advil (analgesic), Centrum, and Caltrate. The company will become a leader in the fields of pain relief, respiratory health, vitamin and mineral supplements, digestive health, skin health, and oral health, and will operate globally under the name GSK Consumer Healthcare. Brian McNamara, current CEO of GSK Consumer Healthcare, will serve as CEO of the joint venture, and Tobias Hestler, current CFO of GSK Consumer Healthcare, will serve as the company’s CFO.

In fact, this large-scale merger did not happen suddenly.

For GSK, this demerger is a preparatory step for its subsequent major strategic moves. In the future, GSK will have two globally oriented companies in the UK: one focused on pharmaceuticals and vaccines, and the other on consumer healthcare.

Additionally, in April 2017, Emma Walmsley, formerly the head of GSK’s Consumer Healthcare business, officially succeeded as the CEO of GSK. She simultaneously implemented extensive internal restructuring, including terminating 30 preclinical and clinical-stage projects, concentrating R&D investment on four key therapeutic areas—HIV, respiratory diseases, oncology, and immune-inflammatory conditions—and reducing development efforts for non-core drugs. During the third-quarter 2017 earnings conference call, she revealed that GSK intended to bolster the competitiveness of its Consumer Healthcare business through acquisitions, with the consumer healthcare divisions of Pfizer and Merck identified as potential acquisition targets.

This collaboration with Pfizer can be described as the bold realization of Emma Walmsley’s earlier vision. She stated that this partnership represents a significant opportunity to enhance GSK’s long-term competitiveness, laying the foundation for its subsequent two focused business units and earning strong approval from shareholders. Influenced by this merger, GSK’s share price rose by 7% yesterday.

For Pfizer, the intention to divest its consumer healthcare business has long been in the making.

To focus on its core prescription drug business, Pfizer officially initiated the sale process for its consumer healthcare division in November 2017, with reports at the time indicating a price tag exceeding $15 billion. Following the announcement, multinational pharmaceutical companies such as GSK and Sanofi expressed interest in acquiring the division. However, GSK later withdrew from the bidding process due to pricing concerns.

At that time, Pfizer had not yet made a final decision on the direction of its consumer healthcare business. It was not until July 2018 that Pfizer officially announced the restructuring of its two existing business segments into three distinct divisions: Innovative Medicines, Established Medicines, and Consumer Healthcare. This reorganization took effect in fiscal year 2019.

Regarding this spin-off, some views at the time held that by carving out its consumer health business, Pfizer would facilitate future actions, whether selling it off or pursuing better growth opportunities. Wall Street generally believed this move was aimed at accelerating the divestiture of Pfizer’s consumer healthcare segment, thereby concentrating its R&D and marketing expenditures on prescription drugs and vaccines.

Today, the establishment of a joint venture by Pfizer and GSK further confirms previous industry speculation, thereby providing direction for their consumer healthcare business.

Albert Bourla, Pfizer’s Chief Operating Officer and incoming CEO, stated: “The combination of strengths in specialized segments will be more sustainable and offer a broader business scope than either company operating independently. We believe that the newly established joint venture presents an excellent opportunity to ensure the future success of Pfizer’s consumer healthcare business while delivering meaningful after-tax value to Pfizer shareholders.”