GSK to Sell Lucozade and Ribena Brands
25 Apr 2013 --- GlaxoSmithKline is to sell soft drink brands Lucozade and Ribena in a move analysts believe will raise over 1 billion pounds and focus its consumer health business on global products. The plan was announced on Wednesday alongside first-quarter results that saw sales at Britain's biggest drugmaker drop a slightly smaller-than-expected 3 percent from a year ago.
Chief Executive Officer’s review “This quarter marks continued strategic delivery for GSK with sales and earnings in line with our expectations, significant pipeline progress and further growth in our returns to shareholders through a 6% increase in the dividend. We are also announcing additional measures to improve the Group’s focus and long term growth profile. As we have previously highlighted, 2013 is a key year for R&D pipeline delivery. While we await a final US regulatory decision in May on Breo Ellipta , I was very pleased with the positive recommendation of last week’s Advisory Committee. During the quarter we also filed our MEK inhibitor monotherapy and MEK/BRAF combination use for melanoma and albiglutide for type 2 diabetes in Europe. This means all six of the key assets we recently highlighted are now under regulatory review in both the US and Europe. I was also delighted that dolutegravir, our integrase inhibitor for HIV, has been granted priority review by FDA, with an Action Date now set for 17 August.”
“Our existing business has started the year as expected with quarterly reported sales down 2% as continued strong contributions from our key growth businesses were offset by several demanding year-on-year comparators. These particularly related to the conclusion of our co-promotion agreement on Vesicare in the US and the divestment of the Group’s non-core OTC brands globally in 2012. Excluding divestments, total sales grew 2% reflecting ex-divestment growth of 6% in Consumer Healthcare and 1% in our Pharmaceuticals and Vaccines business, including EMAP sales growth of 8%. We remain on track to deliver reported full year sales growth of around 1% CER for the Group. In the US, we see further signs of improved performance. Reported Pharmaceuticals and Vaccines sales declined 6%, but excluding Vesicare grew 4%. This was primarily driven by strong performances from our respiratory business (+7%) and from new products including Promacta and Votrient. European Pharmaceuticals and Vaccines sales fell 3%.”
“This is an improvement on performance in recent quarters, largely reflecting the fact that some government price cuts implemented in 2011 and early 2012 have now annualised. Nevertheless, the commercial environment in Europe remains challenging and unpredictable, and we continue to be cautious about the outlook here. As we announced in February this year we are implementing a major new change programme designed to improve the competitiveness of ou r European Pharmaceuticals business and also restructure our manufacturing and R&D businesses to simplify our operating model and release resources. The initial phases of these programmes are progr essing well and remain on track to deliver total annual savings of at least £1 billion by 2016. In the short term, the benefit s of our restructuring programmes are not only helping to offset some of the margin pressure we are seeing due to the changing shape of our business but also are supporting the investment behind our continuing preparations for the launch of the pipeline. In addition, we continue to deliver financial efficiencies with the effective tax rate in line with our targets for the full year, including the benefit this quarter of a US R&D credit, taking the effective rate for the first quarter to 22.4%. These efficiencies contributed to the delivery of first quarter core EPS of 26.9p and we continue to expect to deliver full year EPS growth of 3-4% (CER). The Group generated adjusted net cash inflows from operating activities of £1.4 billion during the quarter compared with £1.1 billion a year ago, benefiting from continued improvement in our working capital programmes. This performance underpins our strategy to improve cash returns to shareholders, demonstrated by a further 6% increase in the Q1 dividend to 18p. We continue to target total share repurchases for the year of £1-2 billion.”
The statement concluded: “We are today announcing further incremental measures to reshape our business, improve our strategic focus and enhance our growth profile. In April 2013, we completed the strategic review of our nutritional drinks brands Lucozade and Ribena and concluded that the tremendous growth potential of these iconic brands, particularly outside the ‘core’ Western markets, could be better leveraged by companies with existing category presence and infrastructure in these regions. As a result, we have decided to pursue the divestment of these brands, subject to the realisation of appropriate value for GSK shareholders. During 2013 we also plan to create a Global Established Products portfolio of our pharmaceutical tail products, which is expected to include over 50 brands with annual sales of around £3 billion. The portfolio will be co-ordinated by a distinct team focused on driving increased efficiencies and value across this portfolio, including in manufacturing, and better coordi nation of tendering and procurement opportunities. Sales of these products will be reported separately from 1 January 2014. In closing, I would also like to take the opportunity to thank our employees, in particular the many teams across the Group whose hard work and commitment has allowed us to make such significant progress on the pipeline in recent months.”
