Moneycontrol
Last Updated : Dec 04, 2018 09:23 PM IST | Source: Moneycontrol.com

Why GSK had to sell its Indian consumer health business

Under the leadership of Emma Walmsley, who was elevated as CEO of GSK in April 2017, the company is focusing on three long-term priorities “Innovation, Performance and Trust.”

Viswanath Pilla @viswanath_pilla
 
 
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The British drug giant GlaxoSmithKline (GSK) on December 3 announced the sale of its consumer health business to Hindustan Unilever (HUL) in a Rs 31,700 crore all-stock deal.

The deal gives HUL ownership of malt-based health drink brands such as Horlicks, Boost and Viva, in addition to over-the-counter oral health brand Sensodyne among others.

On the same day, GSK also acquired Tesaro, a cancer-focused company based in the US for approximately $5.1 billion. The Tesaro buyout gives GSK its FDA-approved ovarian cancer drug Zejula (or niraparib).

Zejula belongs to a fairly new class of medicines known as PARP inhibitors that specifically target and kills cancer cells.

Focus on core

The two deals pretty much sum up the strategy of the 300-year old drug company.

Under the leadership of Emma Walmsley, who was elevated as CEO of GSK in April 2017, the company is focusing on three long-term priorities “Innovation, Performance and Trust.”

As part of that strategy, the company is trying to strengthen its R&D pipeline, improve performance through high growth and better margin products and build trust through reliable supply.

Lack of innovative pipeline of medicines was a major concern of GSK’s shareholders. The company decided to allocate 80 percent of capital to priority assets in two current Respiratory and HIV/infectious diseases and two potential Oncology and Immuno-inflammation therapy areas.

Around three-fifths of GSK’s revenues are earned from the pharmaceutical division. The other two segments are vaccines and consumer health.

“Horlicks didn’t fit into that category as there isn’t much scope to do innovation and malt-based health drink segment isn’t growing,” said an insider of the company.

Malt-based drink segment is expected to grow more slowly than in the past, as consumers switch to less sugary drinks due to the growing problem of obesity and diabetes.

Walmsley is aware of this, as she led the consumer health business, the person said.

Walmsley who joined GSK in 2010 ran the company’s consumer health care business before becoming CEO.

Impact on India

In India, GSK’s operations are divided between two listed entities. The consumer health business is housed under GlaxoSmithKline Consumer Healthcare and based in Delhi, while the pharmaceutical business is based out of Mumbai and is part of GlaxoSmithKline Pharmaceuticals.

With the sale of consumer health business, GSK is now left with the pharmaceutical business having sales of around Rs 2,895.9 crore in FY18.  The company sells innovative drugs, branded generics and vaccines.

To improve profitability, GSK initiated portfolio rationalisation, price hikes and an expanding vaccines business.

GSK is now focusing on 20 key brands in areas where there is a significant unmet patient need; however, the company said it will continue to make and sell over 70 brands in the Indian market.

The company which was relying on its Nashik  plant and third-party manufacturers is also setting up a large formulation facility in Karnataka to ensure supply security of the 20 brands it is prioritizing
First Published on Dec 4, 2018 09:23 pm
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