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Glaxo to Divest Arixtra and Fraxiparine

Zacks Equity Research

GlaxoSmithKline (GSK) recently announced that it has entered into an agreement with a South African pharma company, Aspen Group, to divest two thrombosis products, Fraxiparine and Arixtra, and the related manufacturing site at the Notre-Dame de Bondeville. The deal is valued at £0.7 billion in cash, of which £0.1 billion pertains to inventory.

As per the terms of the agreement, Aspen will acquire worldwide rights to Arixtra and Fraxiparine in all territories excluding China, India and Pakistan. However, Glaxo will continue to distribute and market the products under license from Aspen in Indonesia. Glaxo is expected to transfer the majority of assets related to Arixtra and Fraxiparine by the end of 2013 and the manufacturing site in the first half of 2014.

The move was not unexpected. On the second quarter conference call, Glaxo revealed that it has received an offer from Aspen Group for Fraxiparine and Arixtra, and the related manufacturing site.

The net proceeds from the transaction, expected to be approximately £0.6 billion, will not have an impact on Glaxo’s 2013 earnings.

We believe the deal is in line with Glaxo’s long-term strategy. Glaxo has been streamlining its Consumer Healthcare business segment for some time now. In Sep 2013, Glaxo entered into an agreement with a Japanese consumer goods company, Suntory Beverage & Food Ltd., to divest its nutritional drinks brands, Lucozade and Ribena, for £1.35 billion in cash. The deal is expected to close by the end of this year.

Earlier, Glaxo had divested its non-core Consumer Healthcare over-the-counter products primarily in the U.S. and Europe. Total annual sales of these products amounted to approximately £500 million. Glaxo divested these products with the intention of channeling its focus on priority brands and markets.

We believe that Glaxo will work on streamlining its operations further.

Glaxo, a large cap pharma company, carries a Zacks Rank #3 (Hold). At present, large-cap pharma companies like Roche (RHHBY), Novo Nordisk (NVO) and Jazz Pharmaceuticals (JAZZ) look well-positioned. While Roche is a Zacks Ranked #1 (Strong Buy) stock, Novo Nordisk and Bayer carry a Zacks Rank #2 (Buy).

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