GSK chief Witty opens up to spinoff talk, with consumer health an obvious choice

GSK CEO Andrew Witty

GlaxoSmithKline ($GSK) CEO Andrew Witty may be coming around on a breakup. At the J.P. Morgan Healthcare Conference, Witty said he's open to the idea and pegged his consumer health joint venture with Novartis ($NVS) as a possible option.

"The consumer division is so big in scale--it could one day have a life of its own," Witty said at the conference (as quoted by Bloomberg).

Witty cautioned that such a move wouldn't happen this year or next. For now, GSK is focused on integrating the vaccines business it bought from Novartis and melding the two companies' consumer health units in that JV.

"By bringing these businesses all to real global scale, it for the first time creates the optionality for potentially different structures down the road," Witty said at the conference. "We certainly have a year or two more of work to finish" the integration, he added.

But that's not so long in the scheme of pharma breakups. Consider Pfizer ($PFE) and its long runway for its own possible split into one company focused on older and generic products, and another on new, innovative brands. Pfizer CEO Ian Read proposed the idea in 2013, and the company's timeline now stretches to 2018.

Prominent U.K. investor Neil Woodford, himself a large GSK shareholder, has been pressing the company to consider hiving off some of its units to amp up payoffs to investors. Woodford has a more radical approach in mind, however; he has proposed a four-way split, with consumer health, vaccines, prescription drug brands and HIV-focused ViiV Healthcare all going their own way.

As Woodford told the BBC last week, GSK is so complicated that it runs like four publicly traded companies all bolted together. The company should focus on its strengths--and do a better job of managing them--while handing off its weaker links to others, he contends. Other investors have echoed him, at least about beefing up where it's strong; some suggest GSK buy out Pfizer ($PFE) and Shionogi's interest in ViiV, as well as Novartis' ($NVS) interest in their consumer JV.

GSK has already done some of that, of course. In last year's swap with Novartis, it traded its oncology portfolio to the Swiss drugmaker in exchange for most of Novartis' vaccines. But that deal didn't go as far as other pharma companies have, and Glaxo scrapped plans for a potential ViiV spinoff.

In addition to Pfizer's spinoff of animal health business Zoetis ($ZTS)--and its long-term plans for a potential split--Abbott Laboratories ($ABT) spun off its branded pharma business, creating AbbVie ($ABBV); Merck & Co. ($MRK) divested its consumer health unit to Bayer; and Sanofi ($SNY) is working to unload its animal health and generics lines. And that's just to name a few.

The consumer space is hot right now, and getting hotter. Sanofi is in talks for a swap with Boehringer Ingelheim, which would trade its animal health unit Merial for Boehringer's consumer business. Bidders salivating after Pfizer's consumer business, which could come up for sale as the drug giant works out its latest megamerger, Allergan ($AGN). Bayer says it's gunning for No. 1 in the field, but if the Sanofi-Boehringer deal comes off, the French drugmaker would claim that spot.

- see the Bloomberg story

Special Reports: The top 15 companies by 2014 revenue - GlaxoSmithKline | Pharma's top 10 M&A deals of 2014 - GlaxoSmithKline Oncology/Novartis Vaccines | The 25 most influential people in biopharma in 2015 - Neil Woodford - Patient Capital Trust

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