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GlaxoSmithKline follows Reckitt Benckiser in bowing out of US$20bn auction for Pfizer consumer division

Last updated: 12:09 23 Mar 2018 GMT, First published: 07:48 23 Mar 2018 GMT

advil
Pfizer owns the Advil headache relief range and perhaps chief executive Ian Read, is currently reaching for the container following two auction pull-outs in two days

Pfizer Inc (NYSE:PFE) has suffered a second setback in as many days in its bid to offload its consumer healthcare business with GlaxoSmithKilne (LON:GSK) pulling out of the US$20bn auction.

On Thursday, Reckitt Benckiser (LON:RB.), the maker Durex, Jif lemon and Calgon, folded.

In a statement this morning, GSK chief Emma Walmsley said: "While we will continue to review opportunities that may accelerate our strategy, they must meet our criteria for returns and not compromise our priorities for capital allocation."

It is unclear whether other bidders submitted final offers before the deadline of noon Thursday. According to the Financial Times, Johnson & Johnson and Nestlé followed the early rounds but opted not to make offers.

Many analysts saw the Pfizer deal as a snug fit for GSK, which owns the Aquafresh and Horlicks brands.

Relief rally

However, some thought a transaction of this magnitude might exert too much stress on the UK giant’s balance sheet.

The shares rose 3.6% to £13.20, adding £400mln to the value of GSK, as the move alleviated worries the deal might endanger the dividend.

“More fundamentally, [it] signals the company sticking to its stated priority of investing in pharma where we think the returns should hugely outstrip any upside there would have been from Pfizer,” said Liberum Securities.

Shingle bells?

Separately on Friday, GSK confirmed receipt of regulatory approval for its shingles drug in Europe and Japan.

The green light has already been given in the US and Canada for Shingrix, which, according to Clarivate Analytics, has the potential to achieve sales in excess of US$1bn by 2022.

The drug will be prescribed to patients over the age of 50.

"The risk and severity of shingles increases with age as the immune system loses the ability to mount a strong and effective response to infection,” explained GSK’s vaccines chief medical officer, Dr Thomas Breuer.

“Shingrix was developed specifically to overcome this decline and to help protect people over 50 as we get older.”

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