GlaxoSmithKline said a HIV treatment developed by its ViiV Healthcare joint venture with Pfizer and Shionogi had been granted marketing approval by the European Commission. The HIV specialist joint venture was granted authorisation for Juluca, which treats HIV type-one infections in adults who are virologically suppressed on a stable anti-retroviral regimen for at least six months. 'The European Commission decision for Juluca is very positive news for people living with HIV across Europe, who will now have the opportunity to maintain their viral suppression with a complete treatment regimen composed of only two drugs within a single-pill,' ViiV chief executive Deborah Waterhouse said. 'Thanks to advances in treatment, many people living with HIV who are on therapy are living longer, with near-normal life expectancies.' 'We listened to their concerns about the potential long-term effects of being on treatment for decades, and have developed a solution aligned with a preference to streamline care by taking fewer antiretrovirals to manage their HIV.' At 1:20pm: (LON:GSK) GlaxoSmithKline PLC share price was +3.2p at 1491.4p Story provided by StockMarketWire.com
Lawsuit alleging dismissal of a whistleblower, not good publicity but doesn't sound like a major issue, given that he "left the company following a reorganisation that resulted in his department being outsourced. His leaving had nothing to do with the allegations he made."
GlaxoSmithKline is facing fresh criticism over the way it treats whistleblowers after a lawsuit was filed by a former senior technical lead claiming he was harassed and wrongfully dismissed after repeatedly warning over issues with the pharmaceutical giant's computer fleet.
The case, filed in the US, piles more pressure on Glaxo to review its policy for whistleblowers, after a series of high-profile claims against the company over the last decade.
These have led to a $96m (£71m) payout to one former employee who exposed contamination at a factory in Puerto Rico, a wider-ranging corruption probe in China and a $3bn settlement in the US over mispromoted drugs.
In the latest lawsuit, Thomas Reilly, who worked at Glaxo for 16 years as a senior service management technical lead, claims he alerted both his direct superiors over issues with IT systems, specifically the "instability and non-compliance of the production computer system" that supported drug manufacturing, but his concerns were ignored.
Mr Reilly alleged the problems were "being covered up and disregarded", and that he was subject to "hostility, discrimination and retaliation" after having pointed out the issues.
Mr Reilly claims the issue was escalated to then chief executive Andrew Witty, who he says he contacted over the allegations and believes he followed up on them with the chief information officer.
However, Mr Reilly was later told that an investigation into his allegations had come to nothing and that he was being discharged from employment. He is suing Glaxo under the whistleblower provisions of the Sarbanes-Oxley Act of 2002.
A spokesman for Glaxo said: "We fully investigated Mr Reilly's allegations regarding our IT system each time they were made. Our investigations found no evidence to substantiate these allegations.
"We are confident in the integrity of our financial reporting. Mr Reilly left the company following a reorganisation that resulted in his department being outsourced. His leaving had nothing to do with the allegations he made."
A lawyer for Mr Reilly did not respond to requests for comment.
" Europes medicines regulator said it was assessing evidence that GlaxoSmithKlines (GSK.L) successful HIV drug dolutegravir might be linked to birth defects, adding it should not be prescribed to women seeking to become pregnant. "
Not good if defects are proven to be caused by Dolutegravir but at least by the sound of things the possible link has been picked up relatively early and so the drug should not be given to pregnant women.
GSK's dominance of lung drug market no longer guaranteed
* Pricing pressure jeopardises profitability of newer drugs
* American Thoracic Society meeting crucial for GSK
* Could lead to heightened interest in inhaler Trelegy
By Ben Hirschler
LONDON, May 18 (Reuters) - GlaxoSmithKline is putting more marketing muscle behind its new lung drugs and is looking for a sales boost as top respiratory experts gather to analyse clinical trials data at a meeting in San Diego this weekend.
The British drugmaker has dominated the lung drug market for decades, but its pre-eminence is no longer guaranteed, given declining sales of the ageing Advair inhaler, which could soon face generic competition in the United States.
The market is also seeing intensified pricing pressure, raising doubts over the long-term profitability of newer drugs.
That makes this year's meeting of the American Thoracic Society (ATS) from May 18 to 23 a critical venue for GSK.
Luke Miels, GSK's head of pharmaceuticals, told Reuters the good sales trajectory seen in the first quarter with its novel three-in-one inhaler Trelegy and the injectable Nucala had continued since March, with ATS offering further upside.
A recent expanded U.S. label for Trelegy, to include chronic obstructive pulmonary disease (COPD) patients who need long-term therapy, means GSK can aim its product at millions more patients. Doctors will be presented with clinical data from a pivotal study in this patient group at ATS.
The so-called IMPACT study showed GSK's once-daily Trelegy was superior to other approaches at reducing severe attacks and improving lung function.
"I think the IMPACT data is going to generate lot of interest and out of that we will see a heightened interest in Trelegy," Miels said.
Still, pricing pressure in respiratory medicine remains a black cloud, especially with U.S. generic Advair looming.
Although Advair copycats failed to launch in 2017 as U.S. regulators knocked back applications, they are very possible this year, with Mylan due to hear next month whether the U.S. Food and Drug Administration will approve its version.
TIME WILL TELL
The price squeeze in the U.S. inhaler market is proving more severe than GSK had anticipated at the start of the year, particularly in the ICS/LABA area, which includes Advair. Another class known as LAMA medicine is faring better.
Since Trelegy includes all three products in a single inhaler, it is potentially caught in the cross-fire.
GSK has priced Trelegy at a 20 percent discount to its components and the company has not reduced the price since its launch, but Miels acknowledged this might change once Advair generics arrive.
"We are not experiencing direct pressure on Trelegy at this point in time. I think it's reasonable to think there will be some pressure with the introduction of Advair generics but we're confident we can manage that," he said.
Outside the United States, which is likely to account for around 60 percent of sales, Trelegy has already launched in Britain and is now being rolled out in Germany and Canada.
Consensus analyst forecasts compiled by Thomson Reuters don't predict it becoming a $1 billion-a-year blockbuster before 2023 but Miels said such estimates looked conservative.
"We are more confident," he said. "Time will tell but I hope that over time the analysts will move their numbers up."
Miels, who was hired by new CEO Emma Walmsley last year from AstraZeneca, has redeployed resources to focus on such priority products and nearly all of GSK's more than 2,000 respiratory reps in the United States are now selling Trelegy and Nucala, plus two other relatively new lung drugs Breo and Anoro.
That leaves only a small contract team working on Advair.
GSK will also present long-term data on Nucala - a new kind of biotech drug for severe asthma - at ATS. The medicine has enjoyed a head-start over rivals but now faces competition from AstraZeneca's
The NY Times piece has a good overview of what to expect and implies it will not be as big a hit as investors feared.
"Mr. Trump largely avoided the issues the industry fears the most, such as allowing Medicare to directly negotiate drug prices, or allowing Americans to import drugs. Investors noticed: Stocks of major drug companies rose after his speech, as did those of pharmacy benefit managers, or the middlemen that Mr. Trump said were getting very, very rich.
Discussions on CNBC suggested the middle-men rather than pharma Cos were more at risk.
The piece implies that drug cos would be pushed to increase prices outside the US which might seem positive for Pharma, but unclear how that could be enforced for overseas sales, possibly by limits on price differentials for US vs overseas sales, which would not seem so good.
Heres a rare sight: a long-serving FTSE 100 executive leaving without a payoff. At the age of 55, Simon Dingemans seems too young to retire as finance director of GlaxoSmithKline but he and the company have gone about the process in the correct manner. Dingemans informed the company of his plan, will work out a years notice and will depart next May without a severance payment.
This ought to be completely unremarkable since it is how the world works for 99.9% of the population. It is only in the corporate world that it is often deemed necessary to pay departing executives to go away when theyve chosen to leave anyway. The usual wheeze is to pretend a replacement has to be found within months, thereby triggering an obligation for the employer to cover the full notice period.
The practice is a contractual outrage, of course. Severance payments for voluntary leavers are a nonsense worse, in principle, even than bonuses schemes that pay out in all weathers. The Dingemans example, lets hope, marks a turning point.
aspace - No your not talking to yourself, it's a good effort on your part.
"2. Profits have been erratic over the past nine years."
>> I'd put this down to the hit and miss of getting new drugs accepted whilst watching the ticking clock of your mainstream money earners going off patent. Pharma and especially Bio is a very expensive and risky business to be in. Remember also that Advair's fate from generics has just been delayed not cancelled - when it comes, it will leave a huge hole in GSK's business.
At least GSK has some stability with the consumer stuff, albeit low growth and lower margins.
Your points on 4-5 and 6 are a huge bone of contention in how they are viewed and it's a mute point on how you value these - I'm also concerned about what gets declared and what gets ignored each year when declaring the profit numbers -- they can be construed as somewhat artificial - as Terry Smith's old article points out.
7 - Salaries -- I hadn't realised they were as bloated as this and it does imply these businesses have one hand tied behind their backs before they start - they are too expensive to run with bloated R&D costs.
I held GSK for years and it did nothing, other than pay a decent dividend for which it's questionable whether it could really afford -- I'm not interested in it anymore or AZN for that matter -- The French guy is buying everything that moves at monster prices and if it turns out that those oncology drugs don't give a return, the share price will be toast.
Just thought Id update my periodic analysis of whether or not to buy GSK and post my reasons on here. Even if Im only talking to myself.
Again I have concluded GSK is not a good investment for the following reasons:
1. Some revenue growth but uninspiring.
2. Profits have been erratic over the past nine years. While I would tolerate erratic profits in a smaller company, I would have thought a diversified pharma multinational like GSK should be more steady than this.
3. Free cash flow after tax and investment actually tells a better story over the past nine years. It is always positive, even allowing for the 2015 Novartis transaction. But this glimmer of hope is extinguished by the following negatives.
4. Even if we accept that the £23 billion intangibles are correctly valued on the balance sheet, net assets including intangibles are around only £3.5 billion because assets are strongly offset by liabilities (trade creditors and debt). Yet although the balance sheet is only worth £3.5 billion market capitalisation is a whopping £77 billion at todays share price of £14.35. This implies GSKs market value is 22 times greater than its balance sheet value. Whaaa???
5. Another way of looking at this is net asset value per share is only 65p including the intangibles valued at £23 billion. Yet the share price is an astonishing £14.35.
6. And look at the debt leverage which I calculate to be 80%. That means GSKs assets, much of which are intangible, are financed 80% by long and short term debt and trade creditors. Might be OK if earnings were stable and growing but that is not the case here. It also worries me that trade creditors blew out from £12 billion in 2016 to £21 billion in 2017. If creditors arent getting paid on a timely basis, that might suggest cash flow problems.
7. Yet average salaries continue to rise. Average annual salary per employee has risen from £82,000 in 2016 to £92,000 in 2017 representing a 12% increase which is way above inflation. Furthermore an average salary of £92,000 is far above national average of around £30,000. By way of comparison, average salary at Reckitt Benckiser is £40,000, Unilever is £42,000. So many GSK employees are highly educated R&D scientists. But the data shows payroll cost has got out of hand.
8. Buying at this price means placing enormous FAITH in the ability of GSKs intangible assets to deliver super-profits and/or to discover a new blockbuster like Zantac. They might do it. But when??
I see this one as too optimistically priced, unlikely to be a takeover target at this inflated share price and therefore vulnerable to being a long-term laggard so Ill continue to avoid.
"Time for an update on the GSK vs LLOY debate/debacle games?"
Doug - It was fun while it played out, and I confess to have been lucky enough to have sold GSK at over £17 -- but I guess at today's price who knows?
It's taken the hit today mostly because of the buyback of the Novartis share and the currency exposure -- still the consumer health has indeed stagnated.
Lloyds is a highly risky stock to own because of the massive leverage and for that reason it could never be a big position for me, but I did buy a few before the dividend at 64.Xp but will just as easily sell it again close to 70p - something I've done a few times, although I don't classify myself as any kind of experienced trader like soi.
I didn't like the results. Poor show IMO. I've had just about enough of this stagnation. Shame as they seemed to be on a recovery last few months. Heads should roll. Woody did well to sell out last year at £17 although LLOY hasn't fared much better. Time for an update on the GSK vs LLOY debate/debacle games?
"In the context of what has been a very promising start to 2018 for LSE:GSK:GlaxoSmithKline, today's post-Q1 results share price decline shouldn't be cause for alarm among investors.A 2% fall in both sales and earnings per share (EPS) for the ..."
Glaxo shingles vaccine capturing bulk of U.S. market - Reuters
Apr. 10, 2018 12:14 PM ET|By: Douglas W. House, SA News Editor
Reuters reports that GlaxoSmithKline's (GSK +1.6%) shingles vaccine Shingrix (recombinant, adjuvanted Herpes zoster vaccine) has captured over 90% of the U.S. since its launch only five months ago.
The rapid ramp is at the expense of Merck's (MRK +1%) Zostavax which generated $668M in global sales last year.
Analysts project Shingrix will generate $1.8B in sales in 2024.
Previously: Glaxo's Shingrix OK'd in Europe and Japan; shares up 4% premarket (March 23)
Previously: FDA Ad Com backs Glaxo's shingles vaccine Shingrix (Sept. 13, 2017)
I wouldn't disagree about the UK market in general, but if I were paying someone to manage my money I'd expect them to make fewer howlers than Woody has of late. To then hide the need for cash to service fund redemptions and rights issues by dressing it up as investment management is, like I said, disingenuous IMHO.
As for the B word - please, NO! Not here as well! I've heard enough about that on several other boards ;-)
What Woody conveniently fails to mention is the millions (or is it now billions?) withdrawn from his funds and the cash needed to fund the Provident Financial rights issue (+ Capita rights issue?) All that money has to come from somewhere but he dresses it up as managing investment decisions. A tad disingenuous if you ask me.
He's dumped most of the holding in the Equity Income Fund :-
In it's place he's done this (mix up these words -- hot pan the frying out the fire into of) :-
""""These judgements are always fluid but the opportunity in domestically-exposed companies has become increasingly attractive and the portfolios are evolving to take advantage. This has meant adding further to Lloyds and several housebuilders such as Barratt Developments, Crest Nicholson, Taylor Wimpey and a new position in Bovis. Meanwhile, we have also added to Provident Financial, Babcock International and NewRiver REIT amongst several others.""""
"Now that LSE:GSK:GlaxoSmithKlineÂ has finally ended investor worries about a dividend-busting M&A deal in consumer healthcare, attention has turned back to whatâs wrong with the pharma giant's R&D pipeline.CEO Emma Walmsley continues to have this ..."
"If the business was so lucrative, why would Novartis be so keen to offload it at the earliest opportunity?"
Good question and I dont know but have the following observations.
Novartis put 60% ish of their CH/OTC business into the JV (presumably the rest was not wanted by GSK), they classed the remaining OTC business as discontinued operations. Novartis 2017 annual report section on Strategy did not mention Consumer Healthcare. The deal included Novartis has certain minority rights and exit rights, including a put option that is exercisable as of March 2, 2018 until latest 2035. It looks rather like the JV was always intended as a phased disposal for Novartis. GSK was probably not in a position to buy it out-right at the time (and arguably only just able to do so now). Maybe Novartis want to make a purchase which better fits their strategy.
GSK control the JV although Novartis had positions on the board, Novartis had been complaining that GSK were not pursuing synergy benefits quickly enough. Maybe GSK realized that maximising benefits would fatten up the goose and drive up the sales price, so slow-timing the changes and tolerating a bit of fat for a year or two would reduce the buy-out cost at multiples of the potential savings, too Machiavellian?
Despite the Novartis complaints, CH business had the highest profit growth rate of GSKs 3 divisions at 23% /11% CER, vs Vaccines 15/11 and Pharma (inc R&D) at 8/1, some one-offs helped out but revenue and margin growth were positive. If GSK under EM can now wring out the synergies and get the margin growth they forecast this seems like a good deal for GSK holders.
"The acquisition of the outstanding consumer healthcare stake comes six months after GSK's new CEO announce sweeping disposals and plans for £1bn of cost savings.
These measures are underway, and initial signs are good. The savings are being channelled back into R&D across the new target therapy areas - Respiratory, HIV/infectious diseases, Oncology and Immuno-inflammation. Given that GSK's recent batch of "new" products now account for 22% of revenues and are growing rapidly you can see the attraction.
The steady decline in revenues from Advair has been painful. However, with rivals struggling to get a generic version past the US regulator, the respiratory blockbuster is holding up better than expected. Nonetheless, the looming increase in competition remains a time bomb ticking under the group and at some point will inevitably blow a hole in the GSK income statement.
However, the varied portfolio has been delivering broad-based growth in recent quarters. In particular the increasing contributions from the Consumer Healthcare and Vaccines divisions (now over 40% of group sales combined), should reduce reliance on blockbuster drugs and strained Western healthcare budgets.
It's a sensible strategy and the recurring revenues should help support the dividend.
On that note, the commitment to hold the payout flat next year will have caught the eyes of some investors - following speculation that it could be sacrificed in favour of a big Consumer Healthcare acquisition from Pfizer or Merck. The deal to buy out joint venture partner Novartis will put those rumours to bed for now. At present GSK offers a prospective yield of 6.2%.
Going forwards the focus is firmly on improving free cash flow. Given the recent problems GSK has had in that area, this is very welcome. Free cash was less than 40% of core operating profits last year and didn't even come close to covering the dividend expense.
GSK has some way to go before it's fully out of the woods, but early signs suggest the new CEO is willing to make the tough decisions when required."
This might look crazy, but maybe the deal strengthens GSK's balance sheet, if the deal is largely funded by debt. To keep it simple, forget about selling Horlicks and suppose GSK takes on £9.2B of debt to pay Novartis £9.2B, and it's due to be repaid in 5 years. Is having to pay £9.2B in 5 years, plus interest until then, worse than having to pay Novartis the estimated market value of their Consumer Health stake, bearing in mind that Novartis could exercise their put within windows from 2018 to 2035?
This is how the liability for Novartis's put option has grown:
Year end ~ Liability for Novartis's put option, in millions
2015 ~ £6,204
2016 ~ £7,420
2018 ~ £8,606
Post-deal analyst call ~ £8.9 billion
I suppose you calculate debt-related financial metrics by looking at things called debt, but that shouldn't blind anyone into thinking that if a liability isn't called debt, it can't possibly be worse than debt.
My choice of 5 years to repay the debt is arbitrary. GSK seems more likely to be able to repay £9.2B in 5 years than able to pay Novartis £8.9B as of the date of the deal. I expect that if GSK were allowed to take years to cough up to Novartis, they'd have been keen to communicate it and I'd have seen it. There's also the interest on the debt, and the cash flow from the minority interest, to consider.
"The Consumer Healthcare Joint Venture put option of £6,204 million reflects the recognition of the initial value of the liability on the Group balance sheet."
PDF page 1269 of the 20-F (filed in the US)
"At 31 December 2017, the estimated present value of the potential redemption amount of the Consumer Healthcare Joint Venture put option recognised in Other payables in Current liabilities was £8,606 million (31 December 2016: £7,420 million reported within Other non-current liabilities)."
PDF page 56 of the 2017 results announcement
"The agreed price of £9.2 billion is around 3% different to the undiscounted valuation we included in the year-end accounts of £8.9 billion, well within normal trading ranges.".
PDF page 3 of the analyst call transcript "ACCELERATING OUR STRATEGY: GSK TO ACQUIRE FULL OWNERSHIP OF CONSUMER HEALTHCARE BUSINESS"
"Novartis has the right to require GSK to acquire its 36.5% shareholding in the Consumer Healthcare Joint Venture at a market-based valuation. This right is exercisable in certain windows from 2018 to 2035 and may be exercised either in respect of Novartis entire shareholding or in up to four instalments."
PDF page 1426 of the 2015 20-F (filed in the US)
"The value is close to what was anticipated - GSK already had £8.8bn booked as short term liability on its balance sheet ($12.5bn at current rates)."
Just a minor point. I think "current rates" isn't relevant, except that the rates haven't had time to move much. That's because the acquisition price, though specified in US dollars, has been fully hedged to effectively be a fixed amount in sterling. I got that from the conference call. There's a PDF transcript of it on GSK's site.
Brokers presumably give their view for reasons ... HSBC at £20 is selling something in silver wraps at the back of the nightclub, SocGen at £11 is not, KC saying £14 just as the sp arrives there is er ... but the consensus seems to be that GSK has steered a course through its options and now has more good arguments in its favour than against it. Well done Emma.
The future is no more or less certain. It all boils down to who you want to believe most.
That said I am not going to hide the relief, oh to be back to £14 having dipped in at £13. Not yet content, even with the dividend held it feels cheap, under £15.
Jack, I would have thought the spike in the price today has more to do with big pharma being in sympathy with the muted bid for Shire today, seemingly making the punters look favourably on the sector for at least - well 10 minutes at a time maybe.
HSBC probably don't know their arxe from their elbow, so I would put the accuracy of their target as close as a 50% swing either way.
Games - I mean even AZN with the crazy Frenchy running it is up 1.61% lol !!
"I'm probably in a minority, but selling the family silver to maintain an SP related bonus might not look too bright in a few years time unless a new blockbuster comes on line. "
Well, since Lupo asks.... Not so sure about "family silver" - and ultimately, clinging onto a few tarnished family heirlooms mouldering away in the cabinet isn't going to butter any parsnips. Or something like that?
If possible, it's a view IMHO that risks erring, at the same time, to both what Uncle Vince might call irrational nostalgia, for a past which was never the idyll that some like to recall, and a modern-day cynicism over the motives of PLC directors. No reason I can see to suspect that it's anything more sinister than what they present, a bit more headroom in the balance sheet for higher priority investment for longer term growth... and bedsides, I don't see much problem with SP-related bonus schemes, as long as such are suitably long-term and relatively demanding in horizon and hurdle-rate.
Hiving off Horlicks has been speculated for a while now, and probably for good reason - it's hard to see how it sits with a progressive Consumer Health portfolio on the basis that, er, it really ain't that healthy... however much our pre-War forebears may have believed. The Indians may still go a bundle for it, but the outlook is probably much less positive in more "developed" markets. It would surely sit much better, and with greater "synergy" potential, in the portfolio of a Nestle or a Unilever - unless the latter sees it too much like the next margarine, which is possible.
It is notable they're only committing to a "review" as yet - that is how it should be IMHO. If they can indeed get a frothy (!!) price for it - and I can see why it might today, if not necessarily down the road - then it makes sense to me. If they can't, then maybe just milk it (!!!) for cash? Ultimately, keeping options open, without raising excessive expectation, has to be the sensible road - and as we've learned from both ULVR's Spreads sale and the Pfizer Consumer debacle, the market for supposedly "iconic brands" is not as universally bubbly as some would have you believe....
"According to the analyst comment reported on today's Markets Live... it looks as if this will be earnings accretive, say 2-3%, and the extra debt will mean further sizeable M&A is impossible so the divi is safer than it was. Plus weaker £ also helpful.... would the shares be overvalued on a 5% yield when the price would be 1560, I doubt it."
Following on from OP's post, see below for a few summary views from the "horses' mouths"... and FWIW, while I can't remember if I've put a "fair value" target on this in the recent past, I think OP's 1560p is probably pretty much where I am, too.
"... The valuation is broadly consistent with the contingent liability on GSK's balance sheet... and at 18x LTM EBIT/3x LTM sales seems sensible to us... Assuming GSK will finance this mostly out of commercial paper initially and then refinance the amount in bonds, we estimate a net accretion potential to earnings after interest payments of c3% (the forgone minority pay-away amounts to 7% of EPS). Of note, GSK now talks about Consumer Health margin potential in the mid-20s by 2022 which is ahead of the current target of greater than 20% by 2020, suggesting the potential accretion could rise over time.
After walking away from bidding for the Pfizer OTC business last Friday for returns and capital allocation priority reasons (as per company press release), we do not see GSK return to the bidding process. The Novartis put has always been the #2 capital allocation priority for GSK CEO (investment in pharma is priority #1) and we believe all of the above is hence consistent with GSK's prior statement on capital allocation."
"Consumer Health has become less appealing after a slowdown in market growth recorded by a number of key players, including GSK and Bayer GSK now expects low-single-digit 2018 growth. However, this was a well-flagged capital allocation priority, and GSK said that the put option (in terms of size and timing) was creating inherent uncertainty for capital planning. Furthermore, GSK has done well in operating margin improvement of the JV, increasing it from 11.3% in 2015 to 17.7%.
This deal looks more appealing than the Pfizer USD20bn Consumer Health business; GSK was in pole position for acquiring this, and the stock was up almost 4% last week after GSK reportedly pulled out of the deal. Given the deal raises GSKs net debt/EBITDA from 1.7x to 2.7x, we think this stops GSK from doing meaningful M&A in the near- to mid-term."
"Timing is a bit more surprising given recent comments from Novartis CEO suggesting they were in no rush to sell. Completion of the deal is expected in summer 2018. The value is close to what was anticipated - GSK already had £8.8bn booked as short term liability on its balance sheet ($12.5bn at current rates). We calculate that this transaction should lead to a 2% EPS accretion and 2018 Net Debt/EBITDA ratio of ~2.0x for GSK, post asset sales. GSK expects the strategic review for its consumer assets to be completed around end 2018.
We also note that the press release suggests a margin uplift - GSK now forecasts mid-20s margins by 2022 (we have 22% in 2022). We see this dealas a clear positive for both companies -clarification for both, more flexibility in cash allocation for Novartis, strategic move for GSK. We do not expect this move to put the dividend at risk as it decreases the risk of a large scale M&A."
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