GSK Buys Out Novartis' Stake In OTC Venture; Horlick's May Be Shopped

Brentford, U.K.-based GlaxoSmithKline will pay $13 billion to purchase Basel, Switzerland-based Novartis’ 36.5% stake in a joint venture they’ve maintained for some familiar over-the-counter healthcare brands marketed worldwide. The move is indicative of the diverging paths two new CEOs are leading their companies down.

“GSK chief executive Emma Walmsley, 48 years old, has moved to shake up the company’s drug-research efforts, reshuffling or letting go hundreds of executives and scientists since taking over about a year ago. That is part of an industry-wide effort at several big pharmaceutical firms to refocus attention and resources on the high-risk, but high-reward business of discovering and bringing to market new drugs,” writes Nathan Allen for the Wall Street Journal.



Walmsley, who was named as former CEO Andrew Witty's successor in September 2016, was in charge of GSK’s global consumer healthcare division at the time and, notably, had experience running L’Oréal's business in China before joining the pharmaceutical firm. 

“Novartis chief executive Vasant Narasimhan, 41, on the job just since February, has similarly said his main aim is to reinvigorate the company’s drug discovery pipeline,” writes the WSJ’s Allen. He “has said the over-the-counter business is no longer central to the strategy as he focuses on breakthroughs for cancer and other diseases,” according to Bloomberg’s James Paton. 

“Just days ago, GSK seemed set to buy Pfizer’s consumer healthcare business. However, when it outbid rival Reckitt Benckiser and Reckitt pulled out of the Pfizer auction, GSK’s shares dipped, and the U.K. company ended up pulling out, too,” David Meyer reports for Fortune.

GSK and Novartis joined forces in 2014 “as part of a sweeping $20 billion asset swap and revamp that included combining the Novartis over-the-counter business with the GSK consumer healthcare business. Its products include Panadol headache tablets, Sensodyne toothpaste, muscle gel Voltaren, and Nicotinell patches used by smokers who want to quit,” writes Richard Fletcher of The Times of London. 

“Alongside the deal, Glaxo has set out plans for a ‘strategic review' of Horlicks and other consumer nutrition products and its shareholding in its Indian subsidiary, which could help to finance the Novartis acquisition,” he continues.

Horlicks bills itself as the “The Original Malted Milk Drink” and boasts that it “has a mountain range named after it, was a staple of World War II and starred in the 1948 Olympics.” It actually was dubbed Diastoid when it was created in Chicago in 1873 by two British ex-pat brothers named Horlick and was marketed as “Horlick's Infant and Invalids Food.” 

It has proven to be a peripatetic brand over the years. According to Holly Williams, writing for the Independent in Dublin, “the majority of Horlicks and other nutrition products sales are generated in India, with the Horlicks range widely recognized as a portfolio of premium nutrition products.”

The stake GSK holds in its publicly traded Indian consumer health subsidiary is worth about $3.1 billion, Bloomberg’s Paton reports.

As for the official pronouncements, “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,” GSK’s Walmsley says in a statement. “The transaction is expected to benefit adjusted earnings and cash flows, helping us accelerate efforts to improve performance. Most importantly it also removes uncertainty and allows us to plan use of our capital for other priorities, especially pharmaceuticals R&D.”

For his part, Novartis’ Narasimhan is also looking forward: “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.”

I know you’re dying to know about that mountain range bearing the Horlick name. 

In 1909, explorer Richard Byrd named the Horlicks Mountains on the Ross Ice Shelf in Antartica — the world’s largest body of floating ice — in honor of the company's $30,000 sponsorship of the expedition he was leading. And if you’ve got a few billion sitting around, that venerable heritage can apparently now be bolted onto your own venture powered by digital and data.

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