GlaxoSmithKline plc Could Be Set To Benefit From Colgate-Palmolive’s Mistake

It has come to light over the past few days that one of Colgate-Palmolive‘s leading toothpaste brands contains a chemical that has been linked to cancer-cell growth.

For Colgate, this is a PR disaster.

But it could be good news for GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US), as Colgate’s gaffe could push customers towards its products. 

Dangerous chemical?

Colgate’s Total brand of toothpaste has been found to contain the chemical triclosan, which has been linked to cancer-cell growth and disrupted development in animals. The chemical is used by Colgate as an antibacterial agent to head-off gum disease. But the company could be putting millions of consumers at risk by including this chemical in its products. 

However, there is some debate as to whether or not triclosan is harmful to health. While some studies have shown that it can increase the growth rate of cancer cells, the US Food and Drug Administration (FDA) has approved the chemical for use in consumer products. That said, some analysts have claimed that the evidence used by the FDA to clear the chemical for use was flawed. 

Fortunately, triclosan is only found in the toothpaste that Colgate sells within the US. During 2010, the European Union banned triclosan in materials that come into contact with food.

Set to profit gsk

Glaxo on the other hand, seems to be well aware of the potentially harmful effects of triclosan. The company, which once had triclosan in some Aquafresh and Sensodyne toothpastes, has reformulated all of its oral care products that previously contained it. Originally, the decision to reformulate the products was taken after customer concerns that using triclosan across a range of products would have a negative environmental impact in the future.

Glaxo has exposure to the consumer healthcare industry through its consumer healthcare division, run with Novartis. Indeed, the company’s portfolio of consumer healthcare products contains everyday items such as, Sensodyne, Panadol, Aquafresh, Sensodyne and Nicorette/Niquitin. 

Glaxo’s management believes that one of the group’s most valuable assets is its consumer healthcare business. However, while Glaxo as a group is facing a storm of international criticism concerning bribery allegations, investors are placing a low valuation on the company as a whole, disregarding the strengths of the consumer business.

What’s more, thanks to its $20bn deal with Novartis earlier this year, Glaxo is set to become one of the world’s leading consumer healthcare players. Part of the deal was the creation of a consumer healthcare joint venture, with annual sales of $11bn.

And there’s now the added bonus that, thanks to Colgate’s mistake, consumers will switch to Glaxo’s toothpaste brands, which could add a kick to sales.

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Rupert Hargreaves owns shares of GlaxoSmithKline. The Motley Fool has recommended GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.