GlaxoSmithKline withdrew from the bidding for Pfizer’s consumer-health unit, the second potential buyer to do so this week, in a development that leaves the US drugmaker with dwindling options to dispose of the business that’s valued at as much as $20 billion.
“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,” Glaxo Chief Executive Officer Emma Walmsley said in a statement Friday.
Shares of the UK drugmaker surged as much as 5.9% in London, their biggest intraday gain in four years.
London-based Glaxo made a final bid Wednesday that could value the US giant’s over-the-counter treatments at about $15 billion to $20 billion, people familiar with the matter said this week, asking not to be identified because the matter is private.
Pfizer, based in New York, could pursue a potential spinoff of the unit or hold on to it, the people said, after Reckitt Benckiser Group also pulled out of the process.
Glaxo’s Walmsley has been shaking up the drugmaker, focusing on developing promising new drugs. The consumer division has experienced pressure on prices as drugstores and other retailers vie to get shoppers.
Glaxo’s investors balked last year when Walmsley mentioned interest in the Pfizer unit, fearing that it might endanger the UK drugmaker’s dividend.
The purchase “would have been too expensive,” Oddo & Cie analyst Sebastien Malafosse said in a telephone interview. “Such an amount would have put GSK’s dividend at risk.”
Pfizer said in an emailed statement that it’s evaluating potential strategic alternatives for the business, which include a spinoff, a sale or other transaction, or retaining the business. The company expects to make a decision in 2018.
Amazon and other online retailers also pose a significant challenge in consumer health, offering low prices and home delivery. Bayer AG cited an “Amazon effect” last year on its consumer unit last year, saying that as bricks and mortar stores closed, Internet sales were slicing into its share.
The conditions have prompted some companies to try to shed their consumer divisions. Merck has been exploring options - including a sale - for its consumer-health unit since September. The company has promised a decision by the end of the first half.
Pfizer’s business sells popular brands such as the pain reliever Advil and the dietary supplement Centrum.
A purchase by Glaxo would have been complicated by its joint venture in consumer health with Swiss drug giant Novartis, which has been reluctant to dive further into over-the-counter health products, the people said.