New Glaxo, Novartis bosses driving firms in different directions

Glaxo CEO Emma Walmsley is doubling down on the more steadily performing consumer and vaccine businesses, while Novartis CEO Vas Narasimhan is focusing on R&D and finding new prescription drugs.
Glaxo CEO Emma Walmsley is doubling down on the more steadily performing consumer and vaccine businesses, while Novartis CEO Vas Narasimhan is focusing on R&D and finding new prescription drugs. PHOTOS: REUTERS

LONDON • The new bosses of two of Europe's largest drugmakers are pivoting in different directions, with GlaxoSmithKline doubling down on consumer health as Novartis focuses on finding new prescription drugs.

Glaxo chief executive officer Emma Walmsley's US$13 billion (S$17 billion) deal for Novartis' stake in a joint venture that includes Panadol pain relievers and Theraflu cold medicine comes only days after the British company abandoned its pursuit of Pfizer's consumer unit.

The deal gives Novartis CEO Vas Narasimhan more firepower for the Swiss giant's drug business and acquisitions.

Mr Narasimhan, who rose to the top spot last month, has said the over-the-counter business is no longer central to the strategy as he focuses on breakthroughs for cancer and other diseases.

Ms Walmsley, who took over last year, has emphasised the benefit of combining the more steadily performing consumer and vaccine businesses under the same roof as the more volatile pharmaceutical operations.

Glaxo's three-pronged strategy means being "leaders in each of those businesses", said Shore Capital analyst Tara Raveendran. "In consumer in particular, you need scale, and there aren't that many assets out there that would have given it momentum to achieve that."

Glaxo shares rose as much as 4.7 per cent yesterday in London, while Novartis rose as much as 2.1 per cent in Zurich.

The consumer health sector's pricing has come under pressure as drugstores and other retailers vie for shoppers.

Glaxo's investors baulked last year when Ms Walmsley mentioned interest in the Pfizer unit, fearing that it might endanger the British drugmaker's dividend.

The new CEO has said strengthening Glaxo's pharma business remains her top priority.

Novartis had the right, starting this month, to require Glaxo to purchase its stake in the venture. The new agreement removes uncertainty surrounding that option, Glaxo said yesterday.

The consumer business expects operating margins to improve and approach "mid-20s" percentages by 2022, said Glaxo.

Mr Narasimhan said yesterday in a statement that the sale of the 36.5 per cent stake in the venture, which was formed in 2015, will strengthen Novartis' ability to drive shareholder returns and make acquisitions. The deal should close in the second quarter.

"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," said Mr Narasimhan, who is focusing on the pharma business and research and development.

Novartis reiterated in January that a decision on whether to spin off the Alcon eye-care division will probably not come before the first half of next year.

The deal with Glaxo may have been prompted by an "imminent bolt-on deal", analysts at Jefferies said in a note.

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A version of this article appeared in the print edition of The Straits Times on March 28, 2018, with the headline 'New Glaxo, Novartis bosses driving firms in different directions'. Print Edition | Subscribe