Consumer health products loose shine for Big Pharma

With aging populations in developed markets, health-conscious consumers driving demand for self-medication, and the potential in emerging markets with fast growing populations, consumer health products are a growing and profitable market segment where pharmaceutical companies might overlap more and more often with food conglomerates

In the food business, infant nutrition has been a marker, Nestlé   buying Pfizer Nutrition in 2012 and British Reckitt-Benckiser acquiring in 2017 baby formula maker Mead Johnson (which was spun-off from Bristol-Myers Squibb in 2009). In both cases, the acquisition aimed at extending their presence in emerging markets, probably more successfully for Nestlé on the Chinese market

We suggest the sale by Big Pharma of consumer health may reflect a shift in distribution patterns and a more competitive environment, especially in emerging markets, as product placement at major supermarket chains gains market share over more traditional health outlets

The efforts of Merck KgA (of Germany)   to dispose of its Seven Seas vitamin division are a case in point, and have not been conclusive yet because price expectations (approx. $5bn) are not in line with the prospective distribution patterns. Nestlé withdrew from the Merck auction (Feb. ’18)

Pfizer has also put its over-the-counter health products up for sale (such as Advil painkillers, Centrum multivitamins and Chapstick lip balm) for an expected $20bn; pharmaceutical major GlaxoSmithKline (GSK) of Great Britain has expressed interest and remains currently ‘in pole position’ according to Financial Times . The consumer product division of GSK is run in a joint venture with Novartis who may have the option to sell down its minority stake

Nestlé, confronted with slowing sales and higher competition, will focus on expanding consumer heath as its recent acquisition of Canadian vitamin maker Atrium Innovations for $2.3bn in Dec ’17 demonstrates

In this fast moving business environment, we assume sales by pharmaceutical majors of their nutritional consumer solutions is a durable trend and a necessity to offload product lines with slowing profitability . With better production and cost control expertise, as well as marketing strength in the mass markets, food conglomerates are best positioned on the acquisition trail but past profitability of consumer health will have to be discounted in the light of new market realities