EXTRA: GlaxoSmithKline Acquires US Oncology Firm, Sells Horlicks Unit

LONDON (Alliance News) - GlaxoSmithKline PLC on Monday announced it will pay USD5.1 billion for ...

Alliance News 3 December, 2018 | 1:26PM
Email Form

LONDON (Alliance News) - GlaxoSmithKline PLC on Monday announced it will pay USD5.1 billion for oncology-focused US pharma company Tesaro Inc and sell its Indian nutrition brands to Unilever PLC.

The FTSE 100-listed pharma firm will pay USD75 per share in cash, or USD5.1 billion in aggregate, to acquire Tesaro. Glaxo will also assume Tesaro's net debt.

Tesaro is a commercial-stage biopharma company whose Zejula drug is currently approved in the US and Europe for the treatment of recurrent ovarian cancer.

The drug is a poly ADP ribose polymerase, or PARP, inhibitor. PARP is a protein that aids in cell repair and, by inhibiting that protein, these types of drugs prevent cancer cells from repairing themselves.

Glaxo said that PARP inhibitors "offer significant opportunities" for the treatment of multiple types of cancer. Zejula is being investigated for its potential use in breast, lung, and prostate cancer patients as a single drug and in combination with other drugs.

Glaxo Chief Scientific Officer & Research & Development President Hal Barron said: "Our strong belief is that PARP inhibitors are important medicines that have been under appreciated in terms of the impact they can have on cancer patients. We are optimistic that Zejula will demonstrate benefit in patients with ovarian cancer."

Revenue from Zejula for the nine months to September 30 was USD166 million.

Alongside Zejula, Tesaro has a number of pipeline oncology assets.

The Tesaro acquisition, and its associated research and development and commercial investments, will have a mid to high single digit percentage impact on Glaxo's adjusted earnings per share for the first two years. It will become accretive to Glaxo's adjusted earnings per share by 2022.

The deal will be funded by Glaxo from existing cash resources and drawing under a new acquisition facility.

Glaxo's guidance remains unchanged for 2018 but following the acquisition it expects the adjusted earnings per share growth at constant exchange for the 2016 to 2020 period to be "at the bottom end" of the mid-to-high single digit percentage compound annual growth rate range.

There will be no change to Glaxo's expected 80 pence per share dividend for 2018.

"The acquisition of Tesaro will strengthen our pharmaceuticals business by accelerating the build of our oncology pipeline and commercial footprint, along with providing access to new scientific capabilities. This combination will support our aim to deliver long-term sustainable growth and is consistent with our capital allocation priorities," said Glaxo Chief Executive Emma Walmsley.

Earlier on Monday, Glaxo announced the sale of its Horlicks and other Indian nutrition brands to Anglo-Dutch consumer goods firm Unilever.

The sale involves an all-equity merger of India-listed GSK Consumer Healthcare India with Hindustan Unilever Ltd, also listed in India. The merger is valued at GBP3.2 billion and Glaxo is likely to net around GBP2.4 billion.

Furthermore, the pharmaceuticals company will sell its 82% stake in GSK Bangladesh Ltd and other related brands rights for consumer nutrition in other territories to Unilever for GBP566 million cash.

Proceeds of the deal will, according to Glaxo, be used to support its "strategic priorities" as well as in the reduction of debt and will be earnings neutral.

"Horlicks has made a significant contribution to GSK and to the health of consumers across India for many decades and we believe Unilever is well placed to maximise its future potential. Proceeds from this transaction will be used to support the group's strategic priorities, including investing in our pharmaceutical business," said CEO Walmsley.

In the nine months to September 30, the businesses Glaxo is selling posted GBP406 million of sales and "contributed an operating profit margin percentage in the low 20s".

Glaxo announced that it was seeking bids for its Indian consumer-health unit back in August, with the Financial Times reporting that Unilever was in exclusive negotiations at the end of November.

Malt drink Horlicks, as well as other Indian health drink brands such as Boost, are sold by GSK India, a listed company in which Glaxo holds a 72.5% stake. Following the merger, Glaxo will own approximately 5.7% of Hindustan Unilever.

Once the deal is complete, as is expected to occur by 2019 end, Glaxo will sell the 5.7% stake in tranches, "taking into account market conditions".

Unilever owns the Persil laundry detergent and Ben & Jerry's ice cream brands. It expects the acquisition to achieve substantial synergies and be earnings per share accretive, on an underlying basis, immediately post completion.

In London, Glaxo shares were down 6.2% at 1,51.60 pence each on Monday afternoon. Unilever shares were up 0.4% at 4,258.50p.

By Anna Farley; annafarley@alliancenews.com

Copyright 2018 Alliance News Limited. All Rights Reserved.

Email Form
Securities Mentioned in Article
Security Name Price Change (%) Morningstar Rating
Unilever PLC 4,948.50 GBX 0.81
GlaxoSmithKline PLC 1,578.70 GBX 0.15
About Author Alliance News

Alliance News provides Morningstar with continuously updating coverage of news affecting listed companies.