Merging GlaxoSmithKline and Pfizer's consumer health businesses will help GSK invest more heavily in its pharmaceutical and vaccine development, GSK CEO Emma Walmsley said Wednesday in an interview with CNBC's "Squawk Box."
GSKand Pfizerwill combine their consumer health portfolios, which include brands like ChapStick, Tums, and Nicorette, into the largest producer of over-the-counter drugs. The two companies plan to close the deal in the second half of 2019 and spin off the joint venture sometime in the next three years.
GSK will hold a 68 percent stake in the joint venture, while Pfizer will hold a 32 percent stake. Over-the-counter products typically give pharmaceutical companies steady revenue streams, whereas name-brand prescription drugs can be a volatile business when they lose their patent exclusivity.
Walsmley said the consumer business will still help GSK with cash flow but merging it with Pfizer's consumer unit will create a company with "significant" scale that can focus on only consumer. Meantime, GSK can keep investing in pharmaceuticals and vaccines.
In March, GSK bought Novartis out of its stake in their consumer health venture. Now with the Pfizer deal, GSK expects to save 500 million pounds (about $632 million) by 2022 for expected total cash costs of 900 million pounds and non-cash charges of 300 million pounds. The company plans to reinvest up to 25 percent of the cost savings from the deal into the company's innovation efforts.
Walmsley took the helm in April 2017 and has since promised to reinvigorate the company. Investors have soured as other manufacturers have built robust pipelines of pharmaceutical products while GSK's has lagged behind.
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