GSK bets on emerging markets with $ 1 billion plan to raise stake in India unit
Tuesday, 17 December 2013 00:07
Reuters: GlaxoSmithKline Plc (GSK) has decided to spend roughly $ 1 billion to raise its stake in its Indian pharmaceutical unit, betting on rising demand in emerging markets as sales in developed economies slow due to a wave of patent expirations.
With the latest India deal, GSK is set to spend close to $ 2 billion in roughly a year to increase its holdings in two listed Indian companies, its biggest incremental investment in any country in that period. Emerging markets such as India and Brazil are an important plank of GSK Chief Executive Officer Andrew Witty’s growth strategy, as he grapples with slower uptake of the company’s products in the developed world.
GSK said on Monday it plans to raise its stake in its Indian pharmaceutical unit, GlaxoSmithKline Pharmaceutical, up to as much as 75% from 50.7% through an open offer in a deal worth about 629 million pounds.
In February, GSK lifted its stake in its publicly-listed Indian consumer healthcare subsidiary, GlaxoSmithKline Consumer Healthcare Ltd, to 72.5% from 43.2% for $ 901 million.
Western drug makers like GSK, Pfizer Inc, and AstraZeneca PLC, covet a bigger share of India’s fast-growing $ 13 billion drugs market, but have been frustrated by a series of decisions on intellectual property and pricing.
India in August revoked a patent granted to GSK for its breast cancer drug Tykerb, a decision that followed a landmark court ruling disallowing patents for incremental innovations that was a blow to global pharmaceutical firms.
Despite the challenges, western drug makers have been looking to raise their exposure in Asia’s third-largest economy betting on an increase in healthcare spending. India currently spends about 5% of its gross domestic product on healthcare.
“This really reflects the opportunity we see here in India, particularly the volume opportunity,” said David Redfern, chief strategy officer of GSK, referring to the company decision to raise stake in the Indian unit.
“We have a broad range of medicines and vaccines and we really think over the next few years as India develops we can drive a substantial increase in volume to make more medicines and vaccines available to the Indian population.”