GSK’s Consumer Health Flotation Flags

21.07.2022 - The Jul.18 launch of GSK’s consumer healthcare spinoff Haleon on the London Stock Exchange – said to be the largest London listing in more than a decade – seems to have gone off more like a whimper than a bang.

After opening at 330 p, the stock subsequently faltered and dropped 6.6% to 308.4 p on the first day of trading. Still, the initial public offering (IPO), in which stockholders received one Haleon share for each GSK share they owned, gives the fledgling company a market valuation of about £30 billion.

Haleon ranks as the world’s biggest standalone consumer health business and is the only pure-play consumer health group listed on any stock exchange. The company also belongs to the Financial Times (FTSE) index of the largest 20 companies.

Until GSK and Pfizer, former joint venture partners in the consumer company, end their lockdown in November this year, they will together hold shares in Haleon worth around $15 billion.

Asserting that its OTC products attract strong brand loyalty, the spinoff’s CEO, former Novartis executive Brian McNamara, has forecast like-for-like annual sales growth of 4-6%, although most analysts said they expect growth at the lower end of that range.

McNamara has said also that Haleon will be looking for a bolt-on acquisition worth £50- 100 million.

Some analysts expressed concerns about the impact of inflation on the consumer drugs business, while others said potential buyers of the stock would likely have questions about why GSK refused a Unilever bid of £50 billion – including £10 billion in debt – last year.

Without the lower valuation attached to OTC and generic drugs, GSK will also have to prove its merits in the categories of prescription drugs and vaccines. CEO Emma Walmsley has been under pressure from activist investor Elliott for some time.

Author: Dede Williams, Freelance Journalist