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Consumer health care giant Haleon plans to sell its nicotine replacement therapy (NRT) business outside of the U.S. to Dr. Reddy’s Laboratories in a deal worth $633 million.

A June 26 press release announced the planned acquisition. Haleon, a GSK spinoff that has its U.S. headquarters in Warren, said the divestment will allow it to lower debt and focus on growth areas, like non-prescription drugs, vitamins and oral care products.

The portfolio consists of brands such as Nicotinell, Nicabate, Habitrol and Thrive available in gum, lozenge and patch forms across over 30 markets. Last year, the unit generated $274 million in sales.

The transaction includes an upfront payment of $579 million. It is expected to close in the fourth quarter. According to the companies, operations will transition to Dr. Reddy’s in a phased approach to ensure successful integration of the business.

Haleon CEO Brian McNamara believes the deal 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,” he said.

Over-the-counter concentration

Earlier this year, Haleon disposed of its popular ChapStick brand for $510 million to private equity firm Yellow Wood Partners-backed Suave Brands Co.

Haleon’s other brands include anti-inflammatory drug Advil, Centrum multivitamin, Sensodyne toothpaste, Theraflu cold & flu relief products and Tums antacid.

Meanwhile, Dr. Reddy’s – one of India’s largest generic drugmakers – is building up its over-the-counter offerings. The company, which has its North American base in Princeton, has made the consumer health sector a key focus area for investments as part of an effort to diversify business operations.

In recent years, Dr. Reddy’s has acquired several well-known brands: NRT banner Habitrol, pain relief option Doan’s as well as women’s health products, such as Premama for fertility and parenthood and the MenoLabs portfolio for menopause.

In April, Dr. Reddy’s announced a joint venture with Nestle to combine several nutritional brands.

Dr. Reddy’s Chief Executive Officer Erez Israeli stated, “We see the acquisition of this global portfolio of consumer healthcare products led by the global brand Nicotinell as a logical extension of our efforts in consumer healthcare OTC in recent years, and of our purpose of ‘Good Health Can’t Wait’. We have been steadily building our OTC presence in various markets and investing in our capabilities.”

“As a business, consumer healthcare is a growing and sustainable business with favorable long-term trends. The business to be acquired from Haleon has maintained steady sales and strong profitability over the years. The portfolio is attractive for its customer loyalty, its global nature, and the access it provides to key customers. We believe we can unlock more value, grow the portfolio further, and increase consumer access around the world to these global brands. Given these advantages, it is the ideal anchor around which to build a larger global OTC platform,” Israeli said.