USA — Pfizer Inc. has reportedly announced its intention to sell its 32% stake in Haleon in the coming months, the company’s CFO told the Financial Times. 

The pharmaceutical giant had first revealed plans to divest last June, a month before Haleon went public on the London Stock Exchange.

Formed from the merger of Pfizer and GSK’s consumer health businesses in 2019, Haleon owns popular brands like Sensodyne toothpaste, Theraflu, and Advil, which GSK has referred to as its “most significant corporate change” in two decades.

Although Unilever had made several unsolicited offers, the pharmaceutical company turned them down, citing the consumer goods company’s undervaluation of the business.

Despite its debut at a significantly lower market value than Unilever’s £50 billion (US$68 billion) offer, Haleon’s shares have risen almost 14% since its listing, valuing Pfizer’s stake at around £10 billion (US$12.6 billion).

Pfizer’s Chief Financial Officer, Dave Denton, has stated that the company plans to offload its stake in a “slow and methodical” manner over the next few months.

Meanwhile, Pfizer retains a 32% stake in Haleon, and GSK retains up to 13.5%. GSK shareholders will own the remaining 54.5%.

Denton has explained that while the company “loves the Haleon business”, it is not strategic in terms of Pfizer’s transformation into a more focused global leader in science-based innovative medicines and vaccines.

Furthermore, Pfizer intends to shift its focus from pursuing mergers and acquisitions to boosting shareholder returns.

Haleon reported a decline in its quarterly adjusted profit margin, which can affect its financial performance.

Before the spin-off, Haleon was part of GSK and was considered the world’s only consumer health business available for investors.

However, Haleon now has a direct peer as Johnson & Johnson recently listed its consumer health business Kenvue in the US.

Although demergers can unlock value in some circumstances, in GSK’s case, the pharmaceuticals group had been under pressure from shareholders to break up for years.

These shareholders argued that the sum of GSK’s different businesses was greater than its valuation, and that consumer analysts would value the Haleon business more generously, given its shorter timescales and smaller budgets for research and development compared with the core pharmaceuticals business.

The success of Haleon’s listing will always be compared to the £50bn (US$68 billion) offer Unilever made for the consumer health business.

However, GSK rejected the offer in January 2022, claiming it “fundamentally undervalued” the consumer health unit.

Even if GSK had agreed to the deal, prominent shareholders in Unilever would have opposed it on the grounds of cost and risk.

Today, Haleon’s enterprise value is just over £42.5 billion (US$ 53.8 billion), which includes its market capitalization plus £9.9 billion (US$12.5 billion) of net debt.

While this value is below Unilever’s offer, adjustments must be made for external factors. In particular, the sharp sell-off in pharmaceutical stocks starting in August, when investors were concerned about potential legal liabilities related to claims that the heartburn drug Zantac caused cancer.

GSK and Pfizer previously sold Zantac, as did other companies.

Meanwhile, Pfizer’s operating profit margin dropped last quarter because of increased costs and incremental expenses.

The adjusted operating profit margin was 23.1% and decreased by 0.9% at actual exchange rates and by 1.4% at constant currency.

The dip in revenue was due to reduced COVID-19 vaccine sales compared to Q1 2022.

Pfizer aims to offset these losses with the launch of new products this year, including the Prevnar 20 vaccine for children and infants, as well as a possible RSV vaccine for adults.

In addition, Pfizer’s proposed acquisition of Seagen is expected to enhance its position in oncology, with the deal set to close in late 2023 or early 2024, according to CEO Albert Bourla.

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