Glaxo to sell branded generics in emerging markets

By Ben Hirschler

LONDON (Reuters) - GlaxoSmithKline Plc (GSK.L), the world's second largest drugmaker, took a bold step into the branded generics marketplace on Wednesday via an alliance with South Africa's Aspen Pharmacare Holdings (APNJ.J).

The move, paving the way for the sale of cheap medicines in emerging markets, is the latest sign of Glaxo diversifying the focus of its business in the face of tough conditions for patented drugs in the United States and Western Europe.

Under the terms of the deal -- which Glaxo hopes will drive its emerging market growth -- the British-based group gains access to a broad range of low-cost branded but unpatented drugs.

Glaxo will register them in markets where they have not already been approved and expects to start selling the first from 2010. Aspen will continue to market these products in sub-Saharan Africa and some other countries.

Aspen, whose shares gained more than 4 percent on the news, will receive limited upfront payments from Glaxo but the majority of payments will be made through a profit-sharing arrangement based on actual sales.

The tie-up marks a break from Glaxo's past strategy of concentrating on high-priced patented drugs and reflects the growing importance of emerging markets to the pharmaceuticals industry as sales in developed markets stall.

"Emerging markets are showing strong growth in volumes and branded generics in emerging markets do a lot better than they do in western markets," said Ben Yeoh, an analyst at Dresdner Kleinwort.

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