Haleon to sell non-US nicotine replacement therapy portfolio to Dr. Reddy’s Laboratories
Haleon plc, a prominent player in the global healthcare market, has reached an agreement to sell its nicotine replacement therapy (NRT) business outside of the United States to Dr. Reddy’s Laboratories SA, a subsidiary of Dr. Reddy’s Laboratories Limited. The deal, valued at £500 million, marks a strategic shift for Haleon, allowing it to streamline operations and focus on key growth areas.
The transaction involves an upfront cash payment of £458 million and up to £42 million in deferred, performance-based payments due in 2025 and the first half of 2026. Additionally, proceeds from the transfer of inventory will be received within the same timeframe. The use of the net cash proceeds will align with Haleon’s capital allocation priorities, which include reducing leverage. Completion of the deal, subject to customary regulatory approvals, is anticipated in early Q4 2024.
This divestment represents a pivotal move for Haleon to exit the NRT category outside the US, reducing business complexity and enhancing focus on strategic growth sectors. The NRT business, which generated net revenue of £217 million for the year ended December 31, 2023, includes well-known brands such as Nicotinell, Nicabate, Habitrol, and Thrive. These brands are available in various forms like gum, lozenges, and patches across over 30 markets worldwide.
The sale is expected to have a modest dilutive effect on Haleon’s financials for FY 2024, with an estimated 0.5% reduction in net revenue and a 1% decrease in adjusted operating profit. However, all other FY 2024 guidance provided in the Q1 Trading Statement on May 1, 2024, remains unchanged.
Brian McNamara, Chief Executive Officer of Haleon, expressed his views on the divestiture: “The divestment of Haleon’s NRT business outside of the US is a further example of Haleon being proactive in managing its portfolio and is consistent with our strategy as we implement change to become more agile and competitive. Whilst this business has great brands, these are not core for us, but I’m sure they will continue to flourish given the focus and capability of Dr. Reddy’s.”
The decision to divest the NRT business aligns with Haleon’s ongoing efforts to optimize its portfolio and enhance operational efficiency. This move is expected to bolster Haleon’s capacity to innovate and compete in its primary markets, reflecting its commitment to delivering sustainable growth and shareholder value.