GSK and Pfizer to Combine their Consumer Healthcare Units to form new Joint Venture

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GlaxoSmithKline and Pfizer have reached an agreement to combine their consumer healthcare units to set up a new joint venture that would become the biggest seller of over-the-counter medical products. On Wednesday, GSK announced that the firms will be merging their consumer healthcare units into a single unit which is expected to account for an annual sale of more than $12 billion. Further, GSK will hold the majority share in the market with a 68% stake in the new venture while Pfizer will have an equity interest of 32% in the new company. With the merger, GSK will now have two specialized companies under its authority in Sensodyne and Pfizer’s Centrum Multivitamins. However, Pfizer’s erectile dysfunction drug Viagra did not form the part of the agreement.

The merger is another major collaboration in a string of acquisitions and mergers this year. Expiration of patents for some of the major drugs has led to new companies offering similar drugs at cheaper prices which has, in turn, triggered pharmaceuticals giants to find new and innovative treatments by joining forces with one another. After the announcement by GSK, its share prices surged by 7.4% to end at over 15 pounds in London’s FTSE 100 index.

Merging with Pfizer was another major step that GSK took this year to revamp its business on the back of increasing competition in the pharmaceuticals market. Earlier this year, GSK bought Novartis’ share in a similar joint venture with the pharma giant and also sold its Horlicks business to Hindustan Unilever Limited. Further, the London-based pharmaceuticals company also bought Tesaro, a company that specializes in developing cancer treatment, for $5.1 billion. GSK noted that the deal is estimated to save the company over 490 million pounds by 2022 and will make the new venture the biggest over-the-counter product selling company in the world with a market share of over 7%. Pfizer backed GSK’s view stating that the new venture is expected to lead the market in pain relief drugs, vitamin and mineral supplements, digestive health, skin care, and oral health.

GSK intends to list the new joint venture as a separate company on the UK equity market three years after closing the deal with Pfizer. During this period, the company will dedicate its research and development segment towards developing new and innovative vaccines to treat different conditions while strengthening their pharmaceuticals business.

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