) recently announced that it has entered into an agreement with
Aspen Global Incorporated, a subsidiary of Aspen Pharmacare
Holdings Limited to divest the majority of its Classic Brands in
Australia. As per the terms of the agreement, Aspen Pharmacare will
pay £172 million in cash to Glaxo. The deal is expected to be
completed in the fourth quarter of 2012.
Classic Brands comprises 25 non-promoted products facing generic
competition. The brands being sold to Aspen Pharmacare include
Valtrex, Lamictal, Timentin, Amoxil and Aropax. These brands
collectively recorded sales of approximately £83 million in 2011.
In the first half of 2012, these brands generated sales of
approximately £31 million. Net cash proceeds of £155 million are
expected to be realized from the deal.
We note that, Glaxo and Aspen are not stranger to each other.
Earlier in April 2012, Glaxo entered into an agreement with Aspen
Pharmacare Holdings Limited to divest its non-core over-the-counter
(OTC) brands sold in international markets. As per the terms of the
agreement, Aspen Pharmacare paid £164 million in cash to Glaxo.
This sale was a part of Glaxo's plan to divest non-core Consumer
Healthcare OTC products primarily in the US and Europe, announced
earlier in February 2011. The total annual sales of these products
amounted to approximately £500 million.
GLAXOSMITHKLINE (GSK): Free Stock Analysis
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Glaxo has undertaken this divestment plan with the intention of
channeling its focus on priority brands and markets.
Glaxo's several products including Valtrex, Arixtra, Evoclin,
Lamictal, Imitrex, Requip, Combivir and Epivir 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. The US health care reform and EU pricing pressure will
continue to affect sales.
We currently have an Underperform recommendation on Glaxo. The
stock carries a Zacks #4 Rank (Sell rating) in the short run.