US pharma giant Pfizer has failed to find a UK home for its portfolio of over-the-counter medicines and health products. GlaxoSmithKline (GSK) and Reckitt Benckiser (RB.) have both pulled their bids for the consumer healthcare business amid concerns that the prospective $20bn (£14bn) price tag didn’t match management’s acquisition criteria. It’s bad news for Pfizer (which needs the cash), but good news for GSK and Reckitt shareholders, who had expressed concerns regarding the enormous capital commitment of the acquisition.
Reckitt will instead focus on its organic growth opportunities and the integration of paediatric nutrition company Mead Johnson. The company is in the process of transitioning from a general consumer goods company to one focused solely on health and hygiene. GSK has its own integration task looming. Shortly after withdrawing from the Pfizer bid, management announced the $13bn acquisition of Novartis’s 37 per cent stake in the two companies’ consumer healthcare joint venture.
Reckitt and GSK – which have long been constituents of different markets – are looking increasingly similar. They have both enjoyed decent growth from the consumer healthcare market, which provides better returns than general consumer or even prescription pharmaceuticals in years when drugs come off patent. Reckitt exited the pure pharma market when it spun out Indivior (INDV) in 2015. There are repeated calls for GSK to split up its prescription and over-the-counter medicines businesses.