GlaxoSmithKline has scrapped the sale of its older drugs portfolio after spending months trying to offload the division to private equity firms and rival companies.
The U-turn comes after chief executive Sir Andrew Witty said in July that he was “optimistic” the portfolio could be sold by the end of this year.
GSK said in a statement on Thursday: “The company has evaluated all bids received and has concluded, consistent with its key criteria of maximising shareholder value, not to pursue divestment of these products.”
Britain’s largest pharmaceuticals maker invited some of the world’s biggest private equity players, including Advent, Blackstone and KKR, to make offers for parts of its so-called “established products portfolio”.
The company had been keen to offload the division, which has around 50 medicines that have lost patent protection and face falling revenues and competition from cheaper unbranded rivals. Heartburn drugs Tagamet and Zantac and anti-depressant Seroxat were included in the portfolio.
The part of the portfolio that GSK was looking to sell recorded around £1bn in annual sales.
In July Sir Andrew said that a “raft of companies” had approached GSK about the division from the “mid-tier of the pharma universe and private equity bidders”.
US private equity firm Apollo expressed an interest last month to buy all the products on offer for around £1.9bn, far lower than GSK had anticipated. Other potential buyers had included Denmark’s Lundbeck.
The company’s advisers at Lazard are understood to have faced difficulty in weighing up the competing offers, which were split between drug types and geographies.
Another stumbling block to the deal came when politicians changed US tax rules to make inversion deals more difficult. Just before the US rule change, Abbott had successfully sold a portion of its generic drugs business to US rival Mylan, which meant Mylan could use the deal to move its tax base to a lower-tax jurisdiction. GSK had hoped to replicate the same process.
Sector sources have said that another challenge for private equity suitors would have been securing a profitable exit for a business that is already experiencing declining sales. Private equity firms typically have a three to six-year investment cycle and there is significant uncertainty about the performance of the generic products and whether they would be able to generate investor interest down the road.
GSK last year separated the established products portfolio from the rest of its business, paving the way for eventual disposals.
In September it sold off two blood clot treatments that had been part of the portfolio – Arixtra and Fraxiparine – but retained the rights to sell them in China, India and Pakistan.
GSK has also been selling off other “non-core” assets while sharpening its focus on the areas it believes will provide the most future growth.
Last year it sold its Lucozade and Ribena brands to Japanese drinks giant Suntory for £1.35bn. More recently it brokered an asset swap with Novartis in which it effectively traded its cancer business for its Swiss rival’s vaccines unit.
By Ashley Armstrong
