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Stock Watch: Pharma Businesses That Leave Consumer Behind

Corporate Simplification Risks Discarding Some Valuable And Defensive Attributes

 
• By Andy Smith

Healthcare conglomerates that divorce consumer, animal health and even generics businesses from their pure-play branded pharmaceutical groups could leave a less diversified and riskier sector in uncertain times. But the advantages are apparent.    

Andy Smith
ANDY SMITH OFFERS A LIFE SCIENCE INVESTOR'S PERSPECTIVE ON BIOPHARMA BUSINESS

Masimo Corp.’s recent announcement of the separation of its consumer business marked the latest in a long line of corporate simplifications by former healthcare conglomerates that look likely to be extended by Sanofi’s spin-off of its consumer healthcare business. (Also see "Sanofi Awaiting Key Meeting With FDA To Recommence Cialis Switch" - HBW Insight, 5 February, 2024.) The higher profitability of a pure-play pharmaceutical group after the departure of lower-margin consumer product franchises is often-cited as the transaction’s main advantage. For example, in the four quarters after GSK plc’s* Haleon plc Consumer Healthcare spin-off in July 2022, its continuing earnings per share grew by 55% on the previous period, although its turnover fell by 17%. But there are disadvantages too.

Investors may also recognize the lack of synergies between consumer and pharmaceutical products which, apart from a very few

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