GlaxoSmithKline, the UK’s biggest drugs group, is set to embark on a programme of acquisitions as increased competition from generic rivals, and falling sales of its established treatments, has put pressure on the group’s traditional markets.
The chief executive Andrew Witty, who was appointed in May and has since announced a change of tack that will see GSK attempt to expand its consumer healthcare and emerging markets operations, added that the group had undergone a “tough transition period” in the last year.
Despite the cautionary tone of Mr Witty’s comments, the market reacted positively to the group’s third quarter results published today. While net profits dropped 21.6 per cent to £1.03bn, GSK’s shares closed the day up 1.3 per cent at 1143p. The group showed a 7 per cent increase in sales to £5.88bn and a 6 per cent hike in earnings-per-share to 25.2p. The divided was increased from 1p to 14p, which analysts at Charles Stanley said would be warmly received by the market.
GSK has already been active in the buyout market, having announced earlier this week that it has paid $170m for Biotene, a dry mouth mouthwash, from privately owned Laclede. The deal comes less than a week after the Brentford-based group spent $210m on Bristol Myers Squibb’s mature pharmaceutical products in Egypt, giving it licence options across the Middle East.
The move into areas such as Egypt comes as GSK faces increased competition from generics firms, which are increasingly challenging the research led groups’ patents, particularly in the United States. GSK’s biggest selling product, diabetes treatment Avandia continued to suffer a fall in sales. The drug has suffered a 40 per cent slide in sales since May last year, when the New England Medical Journal published a report linking Avandia to greater risk of heart attacks.