Glaxo Pressing Ahead With Consumer Split, Unit’s Chief Says

(Bloomberg) -- GlaxoSmithKline Plc will press ahead with a plan to split off and list its consumer health division as a standalone company after activist investor Elliott Management Corp. took a stake in the drugmaker, the unit’s chief said.

“We’re on the path to separation, so that’s the plan,” said Brian McNamara, who’s led the division since 2016 and only learned of Elliott’s investment in April when it appeared in the press. “We think that is the best way to really unlock the value of this business and have shareholders benefit.”

The timing and approach to the split will be set out at the June 23 investor day, McNamara said in an interview Friday. Glaxo hasn’t disclosed whether it will opt for a spinoff to shareholders or an initial public offering of the business.

The decision by Elliott to invest has led to speculation Glaxo might revise its plans, muddying the waters at a pivotal moment for the company. The British drugmaker is about to set out on a path focused on pharmaceuticals and vaccines, fulfilling a shift Chief Executive Officer Emma Walmsley outlined in 2018 when the consumer division entered a joint venture with Pfizer Inc.

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Four years into Walmsley’s tenure, investors are keen to see progress. The drugmaker has lagged behind peers such as AstraZeneca Plc, which now boasts a market capitalization 50% higher than Glaxo’s. One of the world’s biggest vaccine maker, Glaxo has also disappointed on its Covid contribution to date, opting to partner with rivals on a shot rather than making its own.

Walmsley is planning to complete the consumer health split by mid-2022, and Glaxo is expected to release 10-year sales forecasts this month, as well as details on the areas of therapy where it will focus following the separation.

Elliott, run by billionaire Paul Singer, has revealed little about its ambitions for the drugmaker. But it has a history of agitating for change, including pushing for the sale of Alexion Pharmaceuticals Inc. before it was bought by Astra in December for $39 billion.

McNamara has spent the last 2 1/2 years getting the 23,000-employee consumer division ready to go it alone, divesting about 50 brands over the last year to raise 1.1 billion pounds ($1.6 billion) to help fund the consolidation with Pfizer, he said. Pain relievers such as Advil and Panadol, along with Sensodyne, Aquafresh toothpaste and Nicorette gum are among its best-known brands.

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The pandemic has created new opportunities and challenges for the business. Customers stocked up on vitamins like Centrum last year, while sales of cold and flu medicines took a hit as lockdowns kept people away from seasonal germs. The crisis has also pushed a lot more purchases online, with e-commerce growing from 4% of sales to 6% last year, McNamara said.

The company is still working on a name for the consumer health business and plans to unveil it early next year. Meanwhile, McNamara has spent recent months talking to investors who may be more keen to own shares in a consumer health company than a drugmaker. He said his job will change dramatically post-split.

“Running an independent company, and a listed company in the U.K., is very different than running a division,” McNamara said. “We’re continuing on the journey of ensuring that we’re externally focused, agile and working at the speed we need to, to compete in the marketplace.”

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