Correction to Glaxo Will Consider Bid for Pfizer Update

By Denise Roland Features Dow Jones Newswires

GlaxoSmithKline PLC would consider a bid for Pfizer Inc.'s consumer-health business should the U.S. company put it up for sale, Chief Executive Emma Walmsley said Wednesday, leaving the door open to a potential deal that would further expand the U.K. company's portfolio of pharmacy staples.

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Pfizer earlier this month said it was exploring a sale or spin-off of its consumer-health business, which analysts have said could fetch more than $10 billion. Glaxo's consumer-health arm is one of the world's largest, with revenue of GBP7.19 billion ($9.44 billion) last year.

"As a leader in consumer healthcare with a track record of very successful integration and as a consolidator in the sector...we would look at these assets carefully," she said on a call with reporters, also referring to the possible sale of Merck KGaA's smaller consumer-health arm.

Glaxo two years ago substantially expanded its consumer-health business by combining it with Novartis AG's consumer-health unit in a joint venture controlled by the U.K.-based company. That deal also involved Glaxo buying Novartis's vaccines business and selling its marketed cancer drugs to the Swiss company.

Consumer-health products, which span pharmacy staples like toothpaste and over-the-counter painkillers, are viewed by some as a good hedge against the much riskier activity of developing prescription-medicines.

For its part, Pfizer is exploring a potential sale of its consumer unit, which sells brands including Advil pain medicine, Centrum vitamins and ChapStick lip balms, to focus more closely on prescription drugs, perhaps through deals. Pfizer has said it will make a decision on how to proceed next year.

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A sale is likely to attract interest from several other pharmaceutical companies with large consumer-health arms, like Johnson & Johnson and Sanofi SA, as well as consumer goods companies looking to expand their presence in healthcare, like Nestlé SA and Reckitt Benckiser Group PLC.

Still, Ms. Walmsley said that regardless of any deal to bolster its consumer-health arm, Glaxo's top priority was sharpening the company's research-and-development operations. Earlier this year, she axed dozens of research programs to focus on four key disease areas.

Her comments came as Glaxo reported a rise in revenue and profit for the third quarter of the year, driven by growing sales for its prescription drugs and consumer-healthcare products.

Glaxo said revenue rose 4% to GBP7.84 billion in the three months to Sept. 30, in line with analysts' expectations. Adjusted operating profit, a measure which strips out one-time items, increased 7% to GBP2.47 billion, beating expectations of GBP2.42 billion. Net profit jumped 50% to GBP1.21 billion because of lower costs related to $20 billion asset-swap deal with Novartis, which hurt the same period last year.

Several of Glaxo's newer drugs, like Nucala for severe asthma and its HIV medicines, were partly responsible for the sales growth.

Consumer-health sales also grew, though revenue from vaccines was flat, largely because of strong demand for flu shots in the year-earlier period.

The results were also boosted by the weakness of the British pound, which has fallen some 12% against the U.S. dollar since the U.K. voted to leave the European Union in June last year. Stripping out currency effects, revenue increased 2% and adjusted operating profit rose 5%.

Glaxo maintained its 2017 guidance, saying it still expected core earnings per share to increase by 3-5% at constant exchange rates. It also confirmed plans to pay a dividend of 80 pence a share for the full-year.

Write to Denise Roland at Denise.Roland@wsj.com

Corrections & Amplifications

This was corrected at 1505 GMT because the original misstated the company's corporate designation in the third paragraph. It is KGaA, not KGgA.

Merck KGaA is considering a sale of its consumer-health arm. "Glaxo Will Consider Bid for Pfizer Update," at 1443 GMT, misstated the company's corporate designation in the third paragraph. It is KGaA, not KGgA.

(END) Dow Jones Newswires

October 25, 2017 11:19 ET (15:19 GMT)