Shareholders in British pharmaceutical giant GlaxoSmithKline (GSK) gave its historic demerger the “expected” seal of approval yesterday, meaning its consumer division will be able to list on the London Stock Exchange as a separate entity later this month.
In the most significant corporate change at GSK for the last two decades, the split will see the separate entity, now known as Haleon, enter London’s main market on 18 July, as GSK awaits a response on its application to the New York Stock Exchange.
Haleon, which owns brands including Sensodyne toothpaste and Panadol painkillers, could have its debut tarnished by a £10.3bn worth of inherited debt, which is around four times its estimated earnings for this year, according to the Daily Mail.
Analysts at broker Jefferies said the figure was ‘notably high’ by stock market standards. However, Mazars partner Nigel Layton told City A.M. that despite market turbulence, investors are unlikely to be too risk averse in betting on Haleon, as it owns such popular household brands.
The demerger – more than a year in the making, having first been proposed to investors in June 2021 – will leave GSK with “less distractions” to focus efforts and capital into infectious diseases and vaccines, after it failed to bring its Covid-19 jab to the market.
“The split will allow GSK to focus on one core business to stand at the forefront of the drug development and its R&D pipeline. While Haleon will benefit from being a unique company on the London Stock Exchange,” said Layton.
At the end of June, GSK announced it will be injecting £1bn into the research and development of infectious diseases and next generation vaccines over the next decade, for illnesses such as malaria, tuberculosis, HIV, neglected tropical diseases and anti-microbial resistance.
The London-headquartered firm also offered to pay up to $3.3bn (£2.6bn) for US vaccine maker Affinivax in late May, a company which focuses on pneumonia, meningitis, bloodstream infections, in what Laura Hoy, equity analyst at Hargreaves Lansdown, described as an effort to “pad out” its pipeline of late-stage drugs.
“The group’s planning to rely on growth from these niche medicines to support its ambitions for five per cent compound annual sales growth, and this acquisition could be the first of many as the group looks to improve its portfolio,” she said at the time.
The group poached Pfizer vaccine executive Philip Dormitzer in November last year, in preparation for the transition, after Dormitzer helped the rival pharmaceutical giant bring its highly successful Covid-19 jab to the global stage in 2020.
Alongside booming profits, the share prices of the pandemic’s main players have rebounded. Over the past year, Pfizer’s share price has soared more than a third, while AstraZeneca’s has jumped 27 per cent.
Analysts and investors now hope that GSK, which has seen its share price grow just seven per cent of the past year, will follow suit and climb even further into the green.