GSK PLC completed the spinoff of its consumer-healthcare business, a bet that greater focus on innovative drugs and vaccines will help accelerate growth at the pharmaceuticals giant.
The new stand-alone company, called Haleon PLC, fetched a market value of about £30.5 billion, equivalent to $36.4 billion, at its stock-market debut Monday. The listing is one of the largest in London for years and the biggest corporate change for GSK—until recently called GlaxoSmithKline–since it was formed through a megamerger in 2000.
The long-anticipated spin is a major pillar of Chief Executive Emma Walmsley’s plan to boost growth at GSK. The company says the move will allow it to put more emphasis on developing new medicines and give it more financial firepower for deal making. As part of the spinoff, Haleon paid a special dividend of around 7 billion pounds to GSK that will significantly cut the drug-and-vaccine maker’s debt load, giving it more flexibility to invest in its pipeline.
Haleon is unusual in being a pure-play consumer-healthcare business. Its portfolio of products ranges from consumer staples like Sensodyne toothpaste and Aquafresh mouthwash—often sold by consumer goods companies—to over-the-counter medicines like Panadol and Advil, which are typically sold by pharmaceutical companies.
Many of the world’s largest pharmaceutical companies trace their roots to the dawn of modern medicine in the 18th and 19th centuries, to apothecary shops and chemical-compounding companies that formulated and sold remedies directly to patients. That legacy meant it was common for pharmaceutical companies to develop and sell over-the-counter medicines alongside the prescription drugs that later became their predominant business.
But in recent years, several companies have moved to shed their over-the-counter businesses to focus on the research-intensive work of developing new drugs and vaccines. Johnson & Johnson last year said it planned to split its consumer arm into a different company, while Merck & Co sold its consumer healthcare business to Bayer AG in 2014. Sanofi SA is in the process of splitting its consumer healthcare into a stand-alone business inside the wider company.
Haleon itself was formed from the consumer-health businesses of GSK, Novartis AG and Pfizer Inc. GSK and Novartis merged their consumer-healthcare businesses as part of a wider deal completed in 2015. That business later fused with Pfizer’s consumer-healthcare arm in a deal that closed in 2019—GSK said at the time of the deal that it intended to eventually spin off the unit.
Pfizer continues to own a 32% stake in Haleon, and GSK owns 13.5%, although both will be free to divest those shares following a lockup period that is set to expire later this year. As part of the spinoff, GSK investors received a Haleon share for every share they own in GSK and are free to trade these immediately.
Haleon generated nearly £10 billion in revenue last year, up from around £4 billion in 2014. Chief Executive Brian McNamara has said he expects the company to grow sales 4% to 6% a year in the medium term—above the industry average of 3% to 4%—partly by boosting online sales and expanding further into emerging markets. Haleon is also betting on two prescription drug “switches” over the next four years, a regulatory process that allows the sale of certain well-established prescription drugs as over-the-counter medicines, to drive growth.
Late last year, Unilever PLC made several offers to buy the business, culminating in a £50 billion bid that was disclosed in January. The Dove soap and Ben & Jerry’s ice cream owner eventually walked away from the proposed deal after GSK rejected the offer, saying it underestimated the long-term value of the business.
Spinning off Haleon is a key part of a yearslong effort by Ms. Walmsley to reinvigorate growth at GSK. Since taking the helm five years ago, she has increased the company’s spending on research, replaced most of its top management and bolstered its drug-and-vaccines pipeline with a succession of deals including the $4.16 billion acquisition of cancer specialist Tesaro.
Still, Ms. Walmsley has come under pressure from activist investor Elliott Management Corp., which has criticized GSK for its historic underperformance and questioned whether the drug-and-vaccines part of the company needs new leadership following the spinoff.
Ms. Walmsley has told investors that her strategy should start paying off this year. The company expects sales of prescription drugs and vaccines to hit at least £33 billion by 2031, compared with £24.5 billion in 2021.
That growth will be driven, Ms. Walmsley has said, by existing big-sellers like shingles vaccine Shingrix, as well as promising new products that are in the late stages of development. Among those is a vaccine against respiratory syncytial virus, or RSV, for older adults. RSV is a common virus that causes cold-like symptoms for most people but can lead to serious health problems in infants and older adults. There is currently no approved vaccine against RSV, although GSK is just one of several companies racing to develop one.
