GlaxoSmithKline Plc plans to form a new unit to house more than 50 older products such as the Zantac antacid, prompting speculation that the U.K.’s largest drugmaker may sell the brands.
The drugs to be included in the Global Established Products portfolio have combined annual sales of about 3 billion pounds ($4.6 billion), London-based Glaxo said in a statement today as the company reported a 6 percent drop in first-quarter profit. A separate team will run the business and focus on cost savings, the company said.
“It’s a sensible move for us to ensure we’re maximizing value in the short run,” Chief Executive Officer Andrew Witty said on a call with reporters. “Of course, it opens up optionality for us in the future.”
Glaxo’s decision echoes a move by Pfizer Inc., the world’s largest drugmaker, to consider splitting its branded and generic-drug businesses into separate units. That too prompted speculation that New York-based Pfizer would divide into two companies.
“The formation of a Global Established Products portfolio looks like a precursor to a spinoff to us,” Jeffrey Holford, an analyst at Jefferies & Co., said in a note to investors.
Glaxo fell less than 0.1 percent to close at 1,678 pence in London. The shares have returned 21 percent in the past year including reinvested dividends, compared with a 32 percent return for the Bloomberg Europe Pharmaceutical Index.
Earnings excluding some items fell to 1.93 billion pounds, or 26.9 pence a share, from a restated 2.05 billion pounds, or 26.9 pence, a year earlier, Glaxo said. That beat the 25.2-pence average of 14 analysts’ estimates compiled by Bloomberg.
Sales fell 3 percent to 6.47 billion pounds after Glaxo sold 17 over-the-counter products to Prestige Brand Holdings Inc. and after Astellas Pharma Inc. took over the promotion of the overactive bladder treatment VESIcare. Analysts had estimated revenue of 6.42 billion pounds.
Tagamet for heartburn, the migraine treatment Imitrex and Zofran for nausea also are among the brands to be placed in the new group, Witty said. The new unit will give shareholders “greater visibility” on where sales growth is coming from, he said.
Some of the products could be sold, the unit could be spun out as a separate publicly listed company, or it could be placed in a joint venture along the lines of Glaxo’s ViiV Healthcare Ltd. for HIV drugs, said Timothy Anderson, an analyst at Sanford C. Bernstein.
Glaxo has completed a review of its Lucozade and Ribena drink brands, and has decided to sell them, the company said today. The brands don’t fit with either the company’s health-care products business or its emerging-markets business, Witty said in February.
If sold, the drinks brands could generate as much as 2.5 billion pounds for Glaxo, according to analysts at Deutsche Bank AG. Witty declined to comment today on how much they might fetch in a sale.
Glaxo is counting on regulatory decisions on six drugs as it seeks to boost sales 1 percent this year and earnings per share by 3 percent to 4 percent.
The company has filed for U.S. approval of the lung drugs Anoro and Breo Ellipta, dolutegravir for HIV, dabrafenib and trametinib for skin cancer, and albiglutide for Type 2 diabetes.
Advisers to the U.S. Food and Drug Administration recommended last week that Breo Ellipta be approved to treat chronic obstructive pulmonary disease, also known as smoker’s cough. Sales of the drug may reach 703 million pounds in 2020, according to Tim Anderson, an analyst at Sanford C. Bernstein & Co. The FDA’s decision on Breo is scheduled for May 12.
Dolutegravir will get a priority review by the FDA, with a decision expected Aug. 17, as it aims to challenge Gilead Sciences Inc., maker of the world’s best-selling AIDS medicine.
Results from late-stage studies of experimental treatments darapladib for heart disease and MAGE-A3, a cancer treatment, also will be released this year.