Glaxo-Novartis JV ‘On Track’ To Launch; J&J ‘Well Through’ Most Of OTC Remediation
This article was originally published in The Tan Sheet
Executive Summary
Glaxo’s consumer product sales will be around 25% of the $40 billion total annual revenues the firm projects following the closure of its Novartis agreement. J&J CEO Alex Gorsky sees light at the end of the tunnel for remediation of the firm’s OTC manufacturing under a consent decree with FDA.
GlaxoSmithKline PLCprojects consumer health care product sales will account for a quarter of its revenues following the launch of its OTC drugs and nutritionals joint venture with Novartis AG.
GSK Chief Strategy Officer David Redfern, at the JP Morgan health care conference in San Francisco on Jan. 13, said Glaxo’s annual revenues will be around £25 billion ($40 billion) post-closure of its Novartis agreement, which also included GSK selling its marketed oncology brands to Novartis and acquiring Novartis’ non-flu vaccines business.
“We're on track for closing the Novartis deal during the first half of this year,” the CSO said in his presentation.
He added the JV “would be one of the world's leading consumer healthcare businesses … right up there with” Johnson & Johnson.
Gorsky Positive On J&J OTC Future
Johnson & Johnson CEO Alex Gorsky sees light at the end of the tunnel for remediation of the firm’s OTC manufacturing under a consent decree with FDA, the agency’s first covering nonprescription drug quality control.
“We're well through the majority of those steps as we speak. We're returning Tylenol to the shelves as well as many of our other OTC brands. Some significant changes have been made,” Gorsky said Jan. 12 in a presentation at the JP Morgan health care conference in San Francisco.
He added that J&J’s McNeil Consumer Healthcare subsidiary is “returning a consistent supply of our OTC products to the market.”
A McNeil executive said in October 2014 that a third-party audit produced a 214-step remediation plan for the firm’s Lancaster, Pa., and Las Piedras, Puerto Rico, plants, which are operating; McNeil’s headquarters plant in Fort Washington, Pa., is closed during remediation under the 2011 decree (Also see "J&J Bit Off More Than McNeil Could Chew In 2006 Pfizer OTC Acquisition" - Pink Sheet, 31 Oct, 2014.).
Redfern also pointed out the geographic reach of the JV, including 36 countries “where this business will be the market leader,” fits well with GSK’s global focus, with 40% of its business now outside the U.S. and Europe.
“It's really what underpins all of our businesses – vaccines, consumer and pharma. We're trying to reach as many people and as many patients as we possibly can. And emerging markets and Japan and so forth will remain very important to the strategy of GSK,” he said.
The JV strengthens GSK’s consumer products business and helps Novartis recover from widespread OTC business setbacks linked to quality-control problems. The combined business will create about $10 billion in annual sales with category-leading positions and brands in wellness, oral health, nutrition and skin health, Glaxo said when the deal was announced in April 2014 (Also see "Glaxo And Novartis Scratch Each Other’s Back With Consumer Product JV" - Pink Sheet, 23 Apr, 2014.).
Glaxo will assume 63.5% control and Novartis will take 36.5% in a split that reflects each firm’s proportional contributions to the arrangement. Novartis is divesting its Habitrol nicotine replacement therapy patch to satisfy Federal Trade Commission anticompetitive concerns about approving the JV (Also see "Industry News Roundup" - Pink Sheet, 25 Nov, 2014.).
“We've been working on integration during the course of this year and I think the more we work on it, the more we see the opportunity, the more we see the fit and the global scale, the critical mass in innovation and advertising and promotion we can really put behind this business,” Redfern said in San Francisco.
Still, launching the JV is part of one of Glaxo’s “three key challenges” in 2015, he added. “First and foremost, complete the Novartis transaction and really drive the value out of having a world-leading consumer business, leadership position in vaccines and the reshaping of our pharma business.