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GlaxoSmithKline to spin-off its consumer healthcare business

on Jun 23, 2021
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  • GlaxoSmithKline to spin-off its consumer healthcare business into a separately listed company.
  • European pharmaceutical analyst, Emily Field, says GSK lacks focused investments in R&D.
  • The NYSE-listed shares of GSK were about 3.5% up in the stock market on Wednesday morning.

GlaxoSmithKline plc (LON: GSK) said on Wednesday its consumer healthcare business will be spun off into a separately listed company. The demerger that was originally announced in December 2018 will eventually result in an $11 billion payment for GSK.

Following the separation scheduled for mid-2022, GlaxoSmithKline will focus on its pharmaceutical business that took a hit last year as the COVID-19 crisis made patients defer treatments.

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CEO Emma Walmsley’s remarks on CNBC’s “Squawk Box”

Commenting on the news, CEO Emma Walmsley said on CNBC’s “Squawk Box”:

“Today, we announced a step-change in growth and performance for new GSK, which is building really on four years of comprehensive transformation set out to address some perennial underperformance from this business.”

The chief executive further highlighted that GlaxoSmithKline is now committed to an over 5% and an over 10% growth in sales and profit, respectively, by 2026. By the end of the decade, the world’s largest vaccine maker wants to hit the milestone of £33 billion in sales.  

“The demerger sets both companies up for success as it also allows us to strengthen new GSK’s balance sheet to keep fuelling growth as well as deliver competitive and progressive returns to shareholders,” she added.

Walmsley confirmed that the new GSK will pay 80 pence per share of dividend this year, and the separated consumer healthcare company is likely to pay dividend in the range of 30 to 50 pence per share.

European pharmaceutical analyst says GSK lacks focused investments in R&D

Emily Field, head of European pharmaceuticals at Barclays, also joined CNBC’s “Street Signs Europe” on Wednesday. Commenting on GSK’s announcement, she said:

“There hasn’t been a lot of focused investments in terms of R&D. For example, GSK divested its oncology business a few years ago to Novartis, followed again by the acquisition of oncology-focused Tesaro a couple years back. So, it’s unclear what the focus is from an R&D perspective. What we want to hear from the company today is what are the therapeutic areas that GSK thinks it has a competitive advantage in, and how much is it going to invest in those areas.”

GlaxoSmithKline was about 3.5% up in the stock market on Wednesday morning. The NYSE-listed shares of the pharmaceutical giant have recovered close to 20% from the year-to-date low of $33.61. At the time of writing, it is valued at about $97 billion and has a price to earnings ratio of 13.41.