Glaxo’s Best ‘Headache’ Remedy May Be Buying Stakes in Ventures - (Bloomberg via NewsPoints Desk)

  • Two of GlaxoSmithKline's most promising businesses, its joint ventures in HIV drugs and consumer health, harbor both a threat and an opportunity, reported Bloomberg.
  • Pfizer, Shionogi, and Novartis, which are the minority owners of the units in question, can force GlaxoSmithKline to buy them out by exercising put options. "These puts are a headache," remarked Richard Marwood, a portfolio manager at Axa Investment Managers.
  • Analyst Naresh Chouhan at Liberum Capital noted that GlaxoSmithKline is searching for growth as its asthma drug Advair faces more competition, and buying the minority stakes could boost 2018 earnings by 16 percent.
  • CEO Andrew Witty cited the possibility of put options earlier this year when he said that GlaxoSmithKline would return only 1 billion pounds to shareholders from the 4 billion pounds it realized in the transaction that created the consumer-health venture with Novartis.
  • Novartis owns 36 percent of that business, while Shionogi and Pfizer own a combined 22 percent of ViiV Healthcare, the HIV joint venture with GlaxoSmithKline.
  • According to Alessandro Valentini, a portfolio manager at Causeway Capital Management, GlaxoSmithKline should "absolutely" try to buy the stakes, adding "This is a much better use of capital than other M&A…It would make a lot of sense for them to capture more of the economics."

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