Glaxo on Acquisition Spree - Analyst Blog

GlaxoSmithKline plc (GSK) recently announced its plans to acquire UK-based Maxinutrition Group Holdings Ltd. for a cash payment of about £162 million. The deal includes the repayment of outstanding debt.

As per the terms of the agreement, Glaxo will acquire Maxinutrition's brands thereby extending its reach in the UK and European sports nutrition market. Maxinutrition will become a part of Glaxo's Nutritional Healthcare business. The company plans to leverage its marketing excellence and R&D innovation capability to foster growth of Maxinutrition in the UK, Europe and international markets.

Maxinutrition, which recorded sales of about £36 million for the fiscal year ended April 2010, is one of Europe's leading sports nutrition company.

Earlier in the month, Glaxo announced its intention to acquire a Chinese pharmaceutical company Nanjing MeiRui Pharma Co. Ltd. for about $70 million in cash. Glaxo will purchase 90% of MeiRui's share capital from Pagoda Pharmaceuticals Ltd. and the remaining from Allergon AB.

The acquisition of MeiRui will help expand Glaxo's portfolio of urology and allergy products, with the inclusion of Prostat for benign prostatic hyperplasia and Sheniting for overactive bladder syndrome. Glaxo expects to complete the transaction by the end of 2010, subject to regulatory approval.

Neutral on Glaxo

We currently have a Neutral recommendation on Glaxo, which is supported by a Zacks #3 Rank (short-term Hold rating). We expect these acquisitions and partnership arrangements to drive future growth for Glaxo, as several of its products are scheduled to go off patent in the next few years. The company's HIV partnership with Pfizer Inc. (PFE) and the Steifel acquisition marked the beginning of the acquisition/partnership trend.

Further, we believe Glaxo's diversified base and presence in different geographical areas should help support revenue growth. Meanwhile, the company's restructuring initiative should help offset the impact of increasing generic competition in the next few years and help earnings grow faster than revenues.

 
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