GSK backs away from mature drugs sale

GlaxoSmithKline (GSK) has abandoned plans to sell off a block of older products after failing to find a buyer willing to pay the asking price.

The portfolio of drugs in its ‘established products’ business was put on the block earlier this year and generates revenues of around £1bn ($1.6bn) a year. GSK was reportedly seeking a sale price of around £3bn but failed to attract interest at that price point.

The established products division – which includes products such as cardiovascular drug Lovaza (omega-3-acid ethyl esters), antidepressant Seroxat/Paxil (paroxetine), migraine treatment Imitrex (sumatriptan) and antiviral Valtrex (valaciclovir) – saw sales decline 17 per cent in the first nine months of the year to £2.23bn. Most of the decline was attributed to the start of generic competition to Lovaza.

GSK had been planning to sell rights to some of the products in North America and Europe, whilst retaining ownership in high-growth emerging markets, which are a key growth focus for the firm.

Earlier, there had been reports of private equity interest in the portfolio – including Apollo Global Management and KKR – as well as from drugmakers including Lundbeck, Lupin and Mylan.

In a short statement, GSK said it had “evaluated all bids received and has concluded, consistent with its key criteria of maximising shareholder value, not to pursue divestment of these products.”

The sale was one of a series of measures designed to revamp GSK’s business as it prepares for an expected tail-off in sales of big-selling respiratory drug Advair/Seretide (salmeterol/fluticasone), which is expected to be hit hard by competition in the next couple of years.

The company has already agreed a deal that will see its oncology business swapped for Novartis’ vaccine operations (excluding flu vaccines) – with GSK pocketing $16bn and paying out around $7bn – and has just provided details of a renewed cost-cutting drive that will see hundreds of jobs shed at its R&D campus at Research Triangle Park in the US.

There have also been suggestions it may decide to spin out its consumer health operations, having already sold off drinks brands Lucozade and Ribena to Japan’s Suntory for £1.35bn last year. It is also considering spinning off a minority share of ViiV, its HIV joint venture with Pfizer.

Divesting non-core businesses is very much in vogue in the pharma industry at present as companies chase efficiency and higher profits, with Sanofi and AstraZeneca both considering the sale of mature product portfolios and Mylan buying a generic drug business from Abbott.

Meanwhile, in the last few months, Reckitt Benckiser has forged a plan to separate its pharma unit, Bayer has started the process of spinning out its material science division after buying Merck’s consumer health unit, Novartis has off-loaded its veterinary division to Eli Lilly, while Abbott separated its pharma operations into AbbVie.

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