Today, Pfizer and Glaxo—also known as Pfizer Inc. and GlaxoSmithKline PLC—announced they will be merging their consumer healthcare businesses to create a massive new venture.
In doing so, Pfizer and Glaxo are creating the globe’s largest consumer healthcare goods company, with over-the-counter brands like ChapStick, Advil, Emergen-C and more under its umbrella.
The plan is for the company to be spun off into its own independent business within five years of the deal’s closure.
Until then, U.K.-based Glaxo will hold a 68 percent stake in the business, while Pfizer will hold a smaller share at 32 percent. It’s set to be a huge moneymaker: Last year, the brands under the new business brought in nearly $13 billion in combined revenue. This new company will also control a whooping 7.3 percent of the over-the-counter sector.
The move comes as both companies—especially Pfizer—have expressed an interest in shedding off their over-the-counter business in favor of focusing on prescription medications, where the margins are higher. Since last year, Pfizer has been attempting to sell its over-the-counter goods business, and there’s been pressure on Glaxo to do the same for years, according to Business Insider.
The two companies are taking a bit of a chance with the plan. In the past, they have used the revenue from their respective reliable over-the-counter businesses to help prop up the prescription side of the business, which is riskier, but with the potential for greater profit. However, that loss of security is worth the gain, said Glaxo chief executive Emma Walmsley.
“There are benefits to having a broader structure, but these are significantly outweighed by the value creation of the deal we are announcing today,” said Walmsley on a reporter call, according to the Wall Street Journal. She added that with the alliance of Glaxo and Pfizer’s over-the-counter brands, the heightened cash flow will be able to better finance the creation of new drugs, as well as cut costs overall, with an estimated savings of more than $630 million.