|GlaxoSmithKline CEO Andrew Witty|
GlaxoSmithKline ($GSK) pulled off a $20 billion asset swap with Novartis ($NVS) in April, hiving off its oncology business and building up in consumer health and vaccines in one fell swoop. But that restructuring might not be enough, CEO Andrew Witty tells the Financial Times. A future spin-off may be in order.
Glaxo could spin off that newly built-up consumer health business, Witty said in an FT interview. That sort of deal isn't imminent, he said. But a time may come when the unit--which launches as a joint venture with Novartis next year--would be better off as an independent company, he said.
Glaxo has already slimmed down by selling off some prescription drugs and consumer products. In addition to selling most of its work in oncology to Novartis--including all its marketed cancer drugs--the company has peddled some of its lower-performing products to other drugmakers. Earlier this year, it divested two of its prescription-only cardiovascular drugs, and a related manufacturing site, to South Africa's Aspen. And it sold off two drinks brands that were once mainstays of the consumer health unit, Lucozade and Ribena; Japan's Suntory bought them for £1.35 billion (about $2.3 billion) last September.
Glaxo has also said it might sell a bigger basket of older, off-patent meds. But this is the first time Witty has suggested that he might be open to a spin-off of the entire consumer health business. In the past, he's thrown his support behind consumer health as an integral part of GSK. In his interview with the FT, he pointed out the symbiotic relationship between prescription meds and OTC drugs, particularly in emerging markets, where Glaxo is focusing a big share of its growth efforts.
He also proclaimed confidence in GSK's long-term future, after the Novartis buys are integrated into its business--and despite the ongoing bribery scandal in China. But he acknowledged that the Novartis deal not only makes GSK stronger as a whole, but strengthens its various units as entities unto themselves. "Through our transaction with Novartis we are making all of our businesses stronger together and stronger as individual components," Witty said, adding that the deal adds value to Glaxo overall.
But the transaction also gives Glaxo more and better choices down the line--spin-off included. The Novartis swap and joint venture "delivers enhanced optionality for the long run," he said.
Glaxo will own 63.5% of the consumer joint venture with Novartis. The Swiss drugmaker has the right to sell its stake back to GSK after three years together.
Other Big Pharma companies have been streamlining their operations by selling or spinning off units. Novartis unloaded its animal health business to Eli Lilly & Co. ($LLY) at the same time as its deal to swap its vaccines unit for GSK's oncology products and set up the consumer J.V. Merck ($MRK) sold off its consumer unit to Bayer HealthCare for $14.2 billion. Abbott Laboratories ($ABT) created AbbVie ($ABBV) in a pharma-unit spinoff last January. And Pfizer ($PFE), of course, has divested several of its bigger businesses, and has reorganized internally for potential future sales or spinoffs.
Meanwhile, Sanofi ($SNY) and AstraZeneca ($AZN) say they may unload billions of dollars worth of older products. And Monday, Reckitt Benckiser said it would go ahead with its plans to hive off its prescription drugs business, by spinning it into a standalone company listed in London.
- read the FT story (reg. req.)
Special Reports: Top 10 drugmakers in emerging markets - GSK | Top 10 pharma companies by 2013 revenue - Glaxo - Novartis