January 8, 2009 / 7:09 PM / 10 years ago

Glaxo CEO sees more bolt-on acquisitions in 2009

NEW YORK/LONDON (Reuters) - GlaxoSmithKline (GSK.L) expects to make further acquisitions in 2009 to bolster its business in emerging markets and in selling over-the-counter medicines, its chief executive said on Thursday.

A GlaxoSmithKline logo is seen outside one of its buildings in west London, February 6, 2008. REUTERS/Toby Melville

But Andrew Witty told a Goldman Sachs conference in New York there were few opportunities to acquire companies in the vaccines space, a particularly promising area of healthcare at present, where Glaxo is already a global leader.

He also ruled out large deals as a solution to improving the lacklustre stock market rating for the British group, which has failed to get as many new drugs to market as investors hoped when it was created via a merger eight years ago.

Witty took over as the head of the world’s second-biggest drugmaker last May with a pledge to diversify the company, including moving into the sale of cheap branded generics in emerging markets.

He is also putting a big emphasis on non-prescription consumer healthcare products as he tries to shift Glaxo’s centre of gravity away from blockbuster prescription drugs like top-seller Advair for asthma.

In both cases, Witty said acquisitions would play an important role.

“We have a number of assets right now in play (in emerging markets) ... In consumer, assets come up now and again,” he said.

“Where we see opportunities we will take them. I certainly see us adding on a number of businesses this year — bolt-on type businesses to continue to round out across the piece,” he added.

Witty acknowledged that Glaxo’s pipeline of new drugs had disappointed investors in recent years, but he argued the company was now creating a much more dynamic research culture, using a funding model inspired by the venture capital industry.

The problems facing the drugs industry as a whole — in particular poor research productivity and a looming “cliff” of patent expiries — have rekindled speculation of more mega-mergers as a way to drive growth through cost cutting and synergies.

But Witty was sceptical.

“I don’t particularly believe that big M&A is going to be a solution to anything in the next few years,” he said. “I’m much more in the business of bolt-on acquisitions than big acquisitions.”

Witty also said he was not interested in moving into so-called bio-similars — generic versions of biotechnology medicines.

Merck & Co (MRK.N) announced a major push into the developing market for generic biotech last month but Witty said he was not convinced the business was attractive, given the high cost of developing such drugs.

Reporting by Ben Hirschler, editing by Will Waterman

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