Glaxo in generic drug alliance
By Gill Plimmer in LondonPublished: June 15 2009 22:05 | Last updated: June 15 2009 22:05
GlaxoSmithKline on Monday stepped up its expansion into emerging markets, striking an alliance to sell more than 100 drugs of Dr Reddy's, the Indian generic pharmaceuticals maker, in Africa, the Middle East, the Asia Pacific and Latin America.
The move marks intensifying interest by pharmaceutical companies in expanding into generics as their medicines go off patent. With sales growth in the US and Europe flagging, drugs companies are competing to expand in emerging markets where selling large volumes at lower prices is more important.
The GSK deal, effective immediately, gives the company access to Dr Reddy's portfolio and future pipeline of more than 100 branded pharmaceuticals in areas such as cardiovascular, diabetes, oncology, gastroenterology and pain management.
Navid Malik, analyst at Matrix Corp, said the deal was likely to signal a wave of further deals. "This gives Glaxo instant gratification," he said. "It generates sales immediately and allows GSK to expand in emerging markets with a ready made mix of products."
Seven emerging nations – Brazil, Russia, India, China, Korea, Mexico and Turkey – could account for 70 per cent of pharma sales growth by 2020, according to a study by UBS. Rising incomes and ageing populations in poorer countries also mean more people are suffering from rich country diseases such as cancer.
Last month, GSK struck a similar $389m deal to acquire a 16 per cent stake in South Africa's Aspen Pharmacare.
Last week it also agreed to create a joint venture flu vaccine business in China. It will combine forces with Shenzhen Neptunus, which is quoted in Hong Kong, taking an initial 40 per cent stake for £21m ($34m) with the prospect of increasing to majority control within two years.
Pfizer, the world's largest pharmaceuticals company, has also stepped up its presence in generics, agreeing licensing deals with India's Auro-bindo and Claris Lifesciences.
The latest GSK agreement does not involve any cash payment or equity stake. Revenues will be reported by Glaxo and shared with Dr Reddy's under terms that the companies are not disclosing. In some undisclosed markets, Dr Reddy's and GSK will co-market drugs.
Abbas Hussain, president of emerging markets at GlaxoSmithKline, said: "This is another significant step forward in our strategy to grow and diversify GSK's business in emerging markets. Growth in both population and economic prosperity is leading to increased demand for branded pharmaceuticals."
The move marks intensifying interest by pharmaceutical companies in expanding into generics as their medicines go off patent. With sales growth in the US and Europe flagging, drugs companies are competing to expand in emerging markets where selling large volumes at lower prices is more important.
The GSK deal, effective immediately, gives the company access to Dr Reddy's portfolio and future pipeline of more than 100 branded pharmaceuticals in areas such as cardiovascular, diabetes, oncology, gastroenterology and pain management.
Navid Malik, analyst at Matrix Corp, said the deal was likely to signal a wave of further deals. "This gives Glaxo instant gratification," he said. "It generates sales immediately and allows GSK to expand in emerging markets with a ready made mix of products."
Seven emerging nations – Brazil, Russia, India, China, Korea, Mexico and Turkey – could account for 70 per cent of pharma sales growth by 2020, according to a study by UBS. Rising incomes and ageing populations in poorer countries also mean more people are suffering from rich country diseases such as cancer.
Last month, GSK struck a similar $389m deal to acquire a 16 per cent stake in South Africa's Aspen Pharmacare.
Last week it also agreed to create a joint venture flu vaccine business in China. It will combine forces with Shenzhen Neptunus, which is quoted in Hong Kong, taking an initial 40 per cent stake for £21m ($34m) with the prospect of increasing to majority control within two years.
Pfizer, the world's largest pharmaceuticals company, has also stepped up its presence in generics, agreeing licensing deals with India's Auro-bindo and Claris Lifesciences.
The latest GSK agreement does not involve any cash payment or equity stake. Revenues will be reported by Glaxo and shared with Dr Reddy's under terms that the companies are not disclosing. In some undisclosed markets, Dr Reddy's and GSK will co-market drugs.
Abbas Hussain, president of emerging markets at GlaxoSmithKline, said: "This is another significant step forward in our strategy to grow and diversify GSK's business in emerging markets. Growth in both population and economic prosperity is leading to increased demand for branded pharmaceuticals."
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