GSK consumer chief plans deal spree after split from pharma

The chief executive of GSK’s consumer healthcare business expects the newly separated company to make deals in growth areas such as vitamins in a sector ripe for consolidation. 

Speaking ahead of a much-anticipated investor day detailing the split between GSK’s pharma and consumer divisions, Brian McNamara told the Financial Times the business would be able to do smaller deals, despite being loaded with debt.

He said the new company — which will be named ahead of a spin-off next year — would look to sell more brands online directly to consumers, convert more prescription drugs to over-the-counter purchases, and expand in China.

“This vitamin mineral supplement side of the portfolio continues to have opportunities,” he said. “A lot of the opportunities in that space are not massive acquisitions . . . I believe we would have the ability to do that if it made sense for the business and it provided the right return.”

GSK is under pressure to impress investors on June 23 after the US hedge fund Elliott Management took a multibillion-pound stake in the company to lobby for change. Some shareholders have expressed doubts about whether Emma Walmsley, GSK’s chief executive who previously led the consumer business, should lead the new pharmaceutical company as planned, as they are concerned she will not be able to revive its lacklustre pipeline.

The consumer healthcare business, which owns brands such as Centrum vitamins and Sensodyne toothpaste, is a joint venture with Pfizer, formed in late 2018 and due to be carved out by summer 2022. It also includes Novartis’s consumer healthcare business, after GSK bought the Swiss drugmaker out of a joint venture earlier in 2018. 

At the strategy day, GSK will tell investors how it plans to structure the spinout, which some analysts have said is likely to make the consumer health business a target for acquisition itself. In 2020, revenue grew by 4 per cent to £10bn, but it will have net debt to adjusted earnings before interest, tax, depreciation and amortisation of 3.5 to 4 times. 

McNamara said the split would enable shareholders to benefit from the “upside” in the business. “Frankly, separation for us means we can operate as an independent company, we can set our own strategy, our own capital allocation priorities,” he said. “This is not going to be a little company, it’ll be somewhere in the FTSE 10 to 20.”

He added that there was still an opportunity for “consolidation” in the sector. GSK is the largest participant in the fragmented industry of consumer health — which includes products such as painkillers, vitamin and mineral supplements, cold remedies, and other drugs bought without a prescription — with 9.1 per cent of the market, according to Euromonitor.

Its three biggest rivals are also pharmaceutical companies — Johnson & Johnson, Bayer and Sanofi — but healthcare has been an area of growth for consumer goods companies such as Reckitt Benckiser and Procter & Gamble.

Vitamins, minerals and supplements received a particular boost from the pandemic, with GSK reporting 16 per cent sales growth in 2020 compared with a year earlier.

Multinationals have been snapping up supplements brands, with Nestlé this year agreeing to buy the main brands of US-based The Bountiful Company, which makes Nature’s Bounty vitamins, for $5.75bn.

“This consumer interest in, and focus on, their personal health and well being . . . really drove incredible growth in the vitamin minerals and supplements,” McNamara said. 

He added that the company was “looking across multiple brands” that it might sell directly to consumers after launching a US website for the ChapStick lip balm last year, viewing direct sales as “an opportunity in sales and in first-party data”.

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