IHS Global Insight Perspective | |
Significance | GlaxoSmithKline (GSK; U.K.) has fully acquired Argentine drug company Laboratorios Phoenix for an estimated US$253 million. It is also seeking regulatory approval for its new lupus drug in the European Union. |
Implications | This is another strategic move for GSK in its quest to cement its presence in the emerging markets outside the Brazil, Russia, India, China, Mexico, and Turkey area. Over the last 50 years, no new lupus drug has been approved; there is therefore a real market need for new innovative treatments for lupus. |
Outlook | Once the deal is completed, GSK will be the third largest company in Argentina; however, the activities of the two companies will remain separate. The regulatory ball for Benlysta is also rolling, and if approved, the drug could become a major revenue earner. |
Argentina Is GSK's Latest Emerging-Markets Expansion Target
U.K. pharma major GlaxoSmithKline (GSK) has announced the full acquisition of Argentine drug maker Laboratorios Phoenix for an estimated US$253 million. Phoenix's portfolio includes brands in the prescription and over-the-counter (OTC) markets for therapeutic areas such as cardiovascular, gastroenterology, metabolic, respiratory, anti-inflammatory, psychiatry, neurology, ophthalmology and urology. Phoenix has over 40 drugs in its prescription-drugs portfolio, and its OTC portfolio includes most antiseptics and dietary supplements. Phoenix also has a research and development unit, TecnoPhoenix, which focuses on the development of osmotic drug-delivery systems. As part of the deal, GSK will also gain access to Phoenix's good medical practice-certified manufacturing facility and its primary-care sales force.
Regulatory Submissions for Benlysta
Earlier this week, GSK submitted a European Union (EU) marketing authorisation application (MAA) for Benlysta (belimumab) for the reduction of disease activity in adult patients with autoantibody-positive systemic lupus erythematosus who are receiving standard therapy. The drug has been developed in partnership with U.S. pharmaceutical company Human Genome Sciences (HGS). The results of the two double-blind Phase III trials BLISS-56 and BLISS-76, which evaluated Benlysta's safety and efficacy in combination with standard-of-care treatment, compared with placebo plus standard-of-care treatment, showed that the drug led to improved patient response rates (see United Kingdom: 2 November 2009: NICE Issues Positive Final Guidance for GSK's Hycamtin in Recurrent Cervical Cancer, Positive Phase III Results for Benlysta).
Outlook and Implications
Taking a closer look at Phoenix, it is easy to see why the company is an attractive investment prospect for GSK. Its portfolio is broadly similar to South Korean drug maker Dong-A, in which GSK bought a 9.9% stake just last month (see United Kingdom: 11 May 2010: GSK Acquires Minority Stake in Dong-A for US$109.6 Mil., Reaches Settlement in First Round of Avandia Litigation). Like Dong-A, Phoenix has a broad portfolio of generic drugs, a growing area of interest for GSK, following its first foray into the generic market with its purchase of a stake in South African generics firm Aspen Pharmacare (see United Kingdom: 1 December 2009: GSK Increases Stake in Aspen by 3%). It is clear to see that GSK is also penetrating the emerging markets in a stepwise fashion: the deal with Aspen targeted the generics market in sub-Saharan Africa, while the deal with Dong-A targeted the Asia-pacific markets, and South Korea in particular, with its double-digit growth rates. It is interesting to see that all these companies are outside the Brazil, Russia, India, China, Mexico, and Turkey (BRICMT) markets that are now becoming increasingly penetrated by other major international pharma companies.
GSK has now turned its attention to the Latin American market, via Argentina, the fourth largest pharmaceutical market in the region. According to IMS, after the core BRICMT markets, Argentina is the eighth largest emerging pharmaceutical market. The value of the market is pegged at US$3 billion, with a growth rate of 22%, states IMS. Recent data showed that between 2002 and 2008, the demand for drugs doubled, and this has been driven by strong economic recovery, increased prescribing by doctors, improved marketing strategies, lower prices, and improved new products availability. Phoenix is the eighth largest pharmaceutical company in Argentina, with sales of £70 million (US$102.7 million) in 2009. GSK's Argentine subsidiary is ranked 14th, with sales of £56 million last year. Although the two companies will continue to operate separately, GSK will now essentially be the third largest pharmaceutical company in Argentina. This is an important strategic move, as local companies have traditionally dominated the market, due to strong brand loyalty.
The EU MAA for Benlysta is expected, following positive results from two Phase III trials. If approved, the drug could potentially be the first drug approved for systemic lupus in over 50 years. As such, there is high market demand for a new lupus drug. HGS has also submitted a biologics licence application to the U.S. FDA. According to the Wall Street Journal, early estimates suggest that if approved, sales of the drug could peak at US$2 billion by 2015.