GSK sets aside $1-2 bn war chest for India acquisitions

GlaxoSmithKline global CEO Andrew Witty on Tuesday said the company has a war chest of $1-2 billion to support its expansion plans in India but will be cautious against overpaying for any buyout. “We can afford a deal worth $1-2 billion in the Indian pharmaceutical space. However, we are not in a hurry to close a deal at a higher valuation.”

Witty, who was here to attend an Organisation of Pharmaceutical Producers of India event, said the Indian pharmaceutical industry needs to ‘metamorphosise’ to meet the challenges of the new world. “The companies should focus on delivering affordable and innovative medicine for patients in emerging markets.”

“Comparing with the chance of failure, it is unacceptable to spend $1 billion to develop a new drug,” he said, urging the industry to get focused on developing medicines relevant to the concerns of patients. Witty, 47, was the head of Pharmaceuticals Europe for GlaxoSmithKline, before taking over as the global CEO in 2007.

Witty, in his earlier interactions with global media, had ascertained his plans to slash prices of medicines in third world countries. According to GSK, it holds around five per cent of the world's pharmaceutical market. The UK-based £29 billion phrama major, earns about £3.6 billion from emerging markets and £3.1 billion from the Asia pacific and Japan.

To strengthen its presence in India, the company had opened a new consumer healthcare R&D centre in Gurgaon. It operates through two companies — GSK Pharmaceuticals Ltd and GSK Consumer Healthcare Ltd.

On overpricing, Witty said there was no relation between foreign ownership and pricing of medicines. According to him, though the innovations should be patent protected, it should not be a reason for higher drug prices. “Drug pricing and protection through intellectual property are different issues.”

A study by E&Y said the IP risk in the Indian market was waning. The study released on Tuesday said: “While a few MNC companies have expressed their apprehensions on enforcement of the patent regime in India, others have successfully launched patented products. This clearly indicates waning of IP risk in the Indian market.”

According to Witty, the increasing population in India should be seen as an opportunity for more effort in drug innovation in India.

“With the burden of a rise in population as well as lifestyle diseases gives the industry the opportunity to contribute meaningfully,” said Witty.

According to E&Y, he Indian market presents vast opportunities for pharmaceutical companies, with successful companies overcoming challenges in the areas of pricing and access to new products and markets. “By 2015, four of the emerging markets are expected to rank among the top 10 global pharmaceutical markets, with China and India emerging as the largest gainers,” the study said.