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After Consumer Spin-off, GSK to get $11B Booster

GSK announced plans on Wednesday to spin off its consumer healthcare division into a separate publicly traded company, generating an 8 billion pound ($11 billion) windfall and other financial benefits for its underperforming medicines division. Investors have been waiting for further information on the separation, first announced in December 2018 when GSK and Pfizer agreed to form a joint venture for consumer goods like Sensodyne toothpaste and Advil medications.

The British company also revealed details of a research pipeline that it claims has benefited from chief scientist Hal Barron’s reorganization efforts but said it would pursue deals to strengthen its drug development prospects further. The planned split, which will take place in the middle of next year, will allow GSK to focus on its core pharmaceuticals and vaccines business, which has been hampered by a lack of fast-growing items and patients deferring treatment COVID-19 pandemic, putting pressure on its stock.

Despite being the world’s largest vaccine manufacturer by sales, GSK has been beaten to developing a COVID-19 vaccine by Pfizer, Moderna (MRNA.O), and AstraZeneca (AZN.L). In addition, following news in April that activist investor Elliott had purchased a multibillion-pound stake in GSK, pressure has mounted on the CEO.

According to Refinitiv Eikon data, GSK is presently valued at roughly 10.3 times its expected core profits, including net debt, which is lower than the global pharma giants’ average of more than 12. GSK predicted that sales in the medicines division would grow at more than 5% per year through 2026, which is about in line with analyst predictions.The consumer unit, which will have its listing on the London Stock Exchange, is likely to pay a dividend of up to 8 billion pounds to the firm. As a result, consumer operations will take on up to four times their adjusted earnings before interest, taxes, depreciation, and amortization in debt (EBITDA).

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