GSK consumer chief predicts wave of deals after split from pharma

GSK’s CEO of Consumer Healthcare business expects the newly separated company to make deals in growth areas such as vitamins in an industry ripe for consolidation.

Speaking ahead of a long-awaited Investor Day detailing the split between GSK’s pharmaceutical and consumer divisions, Brian McNamara told the Financial Times that the company would be able to close smaller deals, despite being in debt.

He said the new company – which will be named before a fallout next year – would look to sell more brands online direct to consumers, convert more prescription drugs to over-the-counter purchases, and expand into China.

“This vitamin and mineral supplement side of the portfolio continues to have opportunities,” he said. “A lot of the opportunities in this space are not massive acquisitions. . . I think we would be able to do that if it made sense to the business and delivered the right return. “

GSK is under pressure to impress investors on June 23 after U.S. hedge fund Elliott Management took a multi-billion pound stake in the company to lobby for change. Some shareholders have expressed doubts whether Emma Walmsley, CEO of GSK who previously ran the consumer business, should run the new pharmaceutical company as planned, as they fear she may not be able to revive its business. dull pipeline.

The Consumer Healthcare business, which owns brands such as Centrum vitamins and Sensodyne toothpaste, is a joint venture with Pfizer, incorporated at the end of 2018 and expected to be dissolved by summer 2022. It also includes Novartis’ consumer healthcare business, after GSK bought the Swiss drug maker from a joint venture earlier in 2018.

On the strategy day, GSK will explain to investors how it plans to structure the split, which some analysts say is likely to make the consumer health business a target for the acquisition itself. In 2020, revenue rose 4% to £ 10 billion, but net debt to adjusted earnings before interest, taxes, depreciation and amortization will be 3.5 to 4 times.

McNamara said the split would allow shareholders to enjoy the “benefits” of the company. “Frankly, separation for us means that we can operate as an independent business, we can define our own strategy, our own priorities for capital allocation,” he said. “It won’t be a small business, it will be somewhere in the 10-20 FTSE.”

He added that there was still an opportunity for “consolidation” in the sector. GSK is the largest participant in the fragmented consumer health industry – which includes products such as pain relievers, vitamin and mineral supplements, cold remedies, and other drugs purchased without a prescription – with 9 , 1% of the market, according to Euromonitor.

Its three biggest rivals are also pharmaceutical companies – Johnson & Johnson, Bayer and Sanofi – but healthcare has been an area of ​​growth for consumer goods companies such as Reckitt Benckiser and Procter & Gamble.

Vitamins, minerals and supplements received a particular boost from the pandemic, with GSK seeing sales growth of 16% in 2020 from the previous year.

Multinationals have taken over supplement brands, with Nestlé this year Okay to buy the main brands of the American company The Bountiful Company, which manufactures Nature’s Bounty vitamins, for 5.75 billion dollars.

“This consumer is interested and focused on their personal health and well-being. . . really led to incredible growth in minerals and vitamin supplements, ”McNamara said.

He added that the company is “looking for several brands” that it could sell directly to consumers after launching a US website for ChapStick lip balm last year, seeing direct sales as “a sales and data opportunity. part one “.

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