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GlaxoSmithKline is set to acquire a 36.5% stake in Novartis’ consumer health arm

Global healthcare company GlaxoSmithKline (GSK) is set to acquire a 36.5% stake in Novartis’ consumer healthcare arm for up to $13bn. The consumer heal...

Catherine Sturman
|Mar 28|magazine8 min read

Global healthcare company GlaxoSmithKline (GSK) is set to acquire a 36.5% stake in Novartis’ consumer healthcare arm for up to $13bn.

The consumer health division is currently a joint venture between the two companies, but GSK is set to acquire a number of brands through the acquisition – Sensodyne and Nicotinell are two of note.

“The proposed transaction addresses one of our key capital allocation priorities and will allow GSK shareholders to capture the full value of one of the world’s leading consumer healthcare businesses,” explained Emma Walmsley, Chief Executive Officer of GSK.

“For the group, the transaction is expected to benefit adjusted earnings and cash flows, helping us accelerate efforts to improve performance.”

The news follows on from the company’s decision to pull out of acquiring Pfizer’s consumer division and emphasises GSK’s strategy to place its pharma and consumer operations under one roof.

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The deal will enable Novartis to further focus on the development and growth of its core businesses and has seen both companies shares rise.

Vas Narasimhan, CEO of Novartis, said: "While our consumer healthcare joint venture with GSK is progressing well, the time is right for Novartis to divest a non-core asset at an attractive price.

“This will strengthen our ability to allocate capital to grow our core businesses, drive shareholder returns, and execute value creating bolt-on acquisitions as we continue to build the leading medicines company, powered by digital and data."

Additionally, Novartis will continue to look at areas of potential growth. Its interest in the Chinese pharmaceutical market is one which will further strengthen the company’s research and development capabilities, as well as introduce new technologies to ensure it remains a key competitor in the market.

“One of the things we are still looking for is faster reimbursement for higher-technology medicines,” explained Narasimhan.

With a significant ageing population and rise of lifestyle diseases across Asia, healthcare in the country is ripe for disruption, where investment in the development of new healthcare solutions continue to rise. It is an area where both companies will be looking with increased interest going forward.