) recently increased its holding in its consumer healthcare
subsidiary in India, GlaxoSmithKline Consumer Healthcare Ltd,
from 43.2% to up to 72.5%. The transaction is valued at
approximately £568 million. The final payment for the shares is
expected to be made on or before Feb 13, 2013.
We are positive on the deal, which is in line with the
company's plans to expand its Consumer Healthcare segment in
India. The Indian consumer healthcare subsidiary generated
revenues of approximately £380 million in 2011 and demonstrated a
compound annual growth rate (CAGR) of 19% per annum in the last 5
The deal will not have any impact on earnings in the first
year but will be accretive thereafter. Glaxo plans to fund the
deal with its existing cash resources.
We note that several products in Glaxo's portfolio are facing
declining sales due to intense generic competition. We expect the
company's top line and gross margins to remain under pressure in
the coming quarters. EU pricing pressure will continue to affect
sales as well.
Glaxo is aiming to maximize the potential return from its
pipeline. The company is looking toward deals and acquisitions to
drive growth. Further, the company is focusing on increasing the
rights on its partnered products and promising pipeline
candidates, so that it stands to benefit more from their
Apart from this, Glaxo continues to progress on its
cost-cutting initiative, which should help reduce the impact of
increasing generic competition over the next few years and boost
Glaxo carries a Zacks Rank #4 (Sell) in the short run.
Large-cap pharma companies that currently look better-positioned
). All these three companies carry a Zacks Rank #2 (Buy).
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