Glaxo chief: Consumer unit can stand on its own—but don't expect a spinoff soon
- According to Andrew Witty, CEO of GlaxoSmithKline (GSK), the firm's consumer health division is close to being worth $14 billion and is on a path to doubling its profit margins. Witty also reiterated that the division could conceivably be spun off at a future date, while also reasserting that it would not make sense to break off other units such as vaccines.
- Some investors want GSK to break up in order to support the stock's upward mobility. The general contention is that the stock is stagnant and a split would get things moving.
- GSK's units included those focused on pharmaceuticals, vaccines, HIV medications, and consumer health products.
The takeaway message here is that GSK is currently well-positioned enough to not have to engage aggressively in M&A, or sell off any units. In fact, the consumer division is performing very well, and on track to double its profits, according to Witty.
He also added that although the unit could conceivably be spun off, that wouldn't happen for at least 18 months, if not longer. Instead of focusing on selling off a unit, or buying a company or asset, Witty says that he plans to focus on organic growth.
"[The consumer unit is] a very substantial business," Witty told Bloomberg from Davos, Switzerland. "At some moment, that thing is going to be big enough to be conceptually thought about on its own. Whether or not we ever do that, there are 100 different permutations, but for the first time that could be conceptually possible."
It is true that the stock has been slow moving. It is currently trading in the $39 range, with a 52-week range of $37.24 to $49.08.