IHS Global Insight Perspective | |
Significance | GSK has significantly strengthened its dermatological franchise and diversified its business through the acquisition of U.S. skincare specialist Stiefel Laboratories in a deal worth up to US$3.6 billion. |
Implications | GSK has gained access to a portfolio of marketed skincare products that in 2008 garnered sales of about US$900 million. In addition, the U.K. company has secured access to a well-stocked product pipeline that could drive future growth. The synergies between the two companies' operations are expected to deliver pre-tax annual savings of up to US$240 million by 2012. |
Outlook | The Stiefel acquisition will have an immediate benefit on GSK's revenues. Further growth momentum will be derived from streamlining of the two companies' operations, distribution and marketing infrastructure benefits and new product development. GSK, which is facing a number of patent expiries in the next few years, is expected to keep looking at targeted acquisitions to counterbalance a fall in revenues. |
U.K. pharmaceutical giant GlaxoSmithKline (GSK) has boosted its dermatological franchise through the acquisition of U.S. skincare specialist Stiefel Laboratories in a deal worth up to US$3.6 billion. Under the terms of the agreement, GSK will pay US$2.9 billion in cash and take over US$0.4-billion worth of Stiefel's net debt. GSK could make additional cash payments of US$0.3 billion depending on future performance. The deal, which was approved by Stiefel's shareholders, is expected to close in the third quarter of 2009.
The companies will combine their dermatology franchises, which will operate under the Stiefel brand. GSK expects cost synergies from the streamlining of administrative and manufacturing capabilities to generate annual pre-tax savings of up to US$240 million by 2012, while integration costs are expected to amount to US$325 million over the next three years. Annual revenues from the combined businesses are expected to be around US$1.5 billion as in 2008 Stiefel's revenues amounted to US$900 million while those of GSK's prescription dermatology products amounted to US$550 million. The combined business is expected to hold about 8% of the global prescription dermatology market.
Privately-held Stiefel, which is controlled by the Stiefel family and partly owned by private equity firm Blackstone Group, was reported as up for sale earlier in the year (see United States: 20 March 2009: Stiefel Labs Puts Itself Up for Acquisition; J&J and GSK Could Be Interested). The company's flagship brands include acne treatment Duac (clindamycin/benzoyl peroxide), dermatitis medicine Olux E (clobetasol propionate) and severe psoriasis treatment Soriatane (acitretin). Stiefel has over 15 research programmes in late-stage development. The company has global operations with facilities in the United States, Mexico, Brazil, Singapore, Ireland and Pakistan.
Outlook and Implications
In addition to the immediate portfolio synergies, the takeover fits in well with GSK's business strategy, which aims to drive growth through business diversification and targeted acquisitions. To this effect, GSK has recently announced a marketing deal with compatriot specialty pharma Shire, an HIV-focused venture with U.S. giant Pfizer and is reportedly interested in South African generic manufacturer Aspen (see United Kingdom: 31 March 2009: GSK Appeals to NICE over Tyverb, Enters U.S. Marketing Deal for Vyvanse and United Kingdom – United States: 17 April 2009: Pfizer and GSK Create New HIV Drugs Firm).
In the present example, the Stiefel takeover will strengthen GSK's prescription dermatology franchise while also increasing the number of products in its consumer healthcare franchise. In the short term, the products' sales will complement that of blockbuster herpes treatment Valtrex (valacyclovir). Meanwhile, the merger of the two companies' operations could promote further product growth as Stiefel's treatments will benefit from GSK's global distribution and marketing networks, which is expected to drive product penetration in markets such as Brazil, Russia, India, China and Japan. Meanwhile, in the United States and Canada, GSK's dermatology products could see further market penetration through Stiefel's well-established presence and brand recognition. This could boost combined marketed product sales in excess of the existing US$1.5 billion annually. In the longer term, Stiefel's well-stocked late-stage product pipeline is expected to generate further sales momentum.