GlaxoSmithKline Divesting Consumer Products Business Unit
Another global healthcare enterprise opts for the spinoff strategy to generate cash and streamline operations
GlaxoSmithKline (GSK) is pulling the trigger on earlier considerations and spinning off its consumer products business unit as a separate company.
It has been reported that GSK (NYSE: GSK) had a divestiture of its consumer products portfolio at least as far back as 2018. They are moving forward with such an exercise that is estimated to generate about $11 billion for their coffers to pay off debt and make strategic investments aligned with their pharmaceutical business.
GSK plans to complete the spinoff by the middle of 2022. Another investor in the consumer products business unit, Pfizer (NYSE: PFE), also has a sizable share of the total enterprise estimated at 31% percent. Pfizer has communicated they will seek to divest their stake as well.
Strategic corporate divestitures increasingly popular lately in the healthcare industry
Large-scale business maneuvers like mergers and acquisitions or spinoffs are nothing new in the healthcare industry. Lately, divestitures have risen in popularity as it quickly enables enterprises to offload non-strategic assets and use the proceeds in a variety of ways. They include:
- Rewarding shareholders with increased dividends
- Retiring debt
- Investing in research & development
- Acquiring other organizations complimentary to their latest business model and strategy
Depending on their finances, some companies jettison parts of their organizations to stay afloat during tough times when product new product pipelines run low or other challenges emerge.
Merck initiates the sale of a business and the creation of a spinoff company
Early in 2020 Merck’s CEO Kenneth Frazier announced plans for the company to sell off several product portfolios to form a new standalone company. The new spinoff organization, known as Organon, is made up of:
- Women’s Health
- Biosimilars
- Legacy products
Merck (NYSE: MRK) also sold its StayWell business unit to WebMD/Internet Brands, a company owned by private equity powerhouse KKR during the first half of 2020.
Walgreens Boots Alliance sells off a majority stake in a global wholesale business
Early in 2021, Walgreens Boots Alliance (NASDAQ: WBA) sold off most of its ownership in Alliance Healthcare for about $6.2 billion to AmerisourceBergen (NYSE: ABC).
Walgreens had acquired Alliance Healthcare as part of its blockbuster deal that was completed in 2014 for about $22 billion all-in. Interestingly, Walgreens Boots Alliance owns about 28% of AmerisourceBergen.
Becton Dickinson exiting diabetes care by divestiture strategy
During the second quarter of 2021 Franklin Lakes, New Jersey-based Becton Dickinson (NYSE: BDX) communicated that it is largely leaving the diabetes care business sector. Becton Dickinson plans to assemble these products into a new freestanding healthcare products company:
- Diabetes care mobile app
- Insulin syringes
- Pen needles
- Sharps containers for home use
- Support products and supplies for self-injection
The company is the world’s largest syringe manufacturer and a viable contender in the global medical device market sectors.
GSK is a formidable global healthcare leader
Founded in 2000 through a merger combining two companies, Glaxo and SmithKline, GSK generated about $43 billion in global sales during 2020. GSK is based in Brentford, UK with significant corporate and research facilities in Philadelphia, Pennsylvania and Research Triangle Park, North Carolina.
In April of 2021, the company earned FDA approval for its mission-critical Women’s Healthcare oncology product Jemperli (dostarlimab-gxly). Jemperli is indicated to treat recurrent or advanced dMMR endometrial cancer and is a product that will be readily embraced by female cancer patients and oncology medical professionals desperate for new and effective treatment options.
By selling the consumer products business unit, which is located in Warren, New Jersey, they become a pure biopharmaceutical enterprise. Presently, their key product categories in prescription drugs are HIV, immuno-inflammation and oncology. Their plans call for a stronger focus on gene therapy and immunology.
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