GSK drops out of $20B race for Pfizer’s consumer health unit — shares surge

GlaxoSmithKline has decided not to pursue an acquisition of Pfizer’s consumer health business after all, raising questions as to what they might spend on instead.

Emma Walmsley

The surprise move came a day after consumer health company Reckitt Benckiser withdrew its bid, which left GSK the frontrunner to buy the unit responsible for Advil and Centrum vitamins. CEO Emma Walmsley was reticent about the rationale behind her decision, saying only this in a statement:

While we will continue to review opportunities that may accelerate our strategy, they must meet our criteria for returns and not compromise our priorities for capital allocation.

Whatever that means, investors liked it, with its shares in London climbing as much 5.9% in what Bloomberg describes as “their biggest intraday gain in four years.” The New York market saw a more modest (though still significant) spike of 3.8%.

Walmsley, who used to lead GSK’s consumer health arm before taking the helm as CEO, spooked investors last year when she mentioned interest in the Pfizer unit. The reported price tag of $15-20 billion, investors worried, would dilute dividends.

Now that they’re keeping that powder dry, GSK might be expected to focus more resources on its own pipeline.

Both would seem in line with the cultural revamp under way at the UK pharma giant. After years of sliding along under Andrew Witty with an underperforming research group, Walmsley and her lieutenants have been shaking things up in the biopharma group, looking to match a blockbuster R&D strategy that has helped drive a slate of new programs at other aggressive top-15 companies like Novartis.

More broadly, the move reflects Big Pharma’s attitude toward consumer health, which sees companies like GSK backing more lucrative R&D projects instead.

With additional reporting by Brittany Meiling.

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Research Scientist - Immunology
Recursion Pharmaceuticals Salt Lake City, UT
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Atlas Venture Cambridge, MA

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