Sector News

GSK CEO: Big pharma should keep investing in R&D

May 3, 2016
Life sciences

GlaxoSmithKline CEO Andrew Witty attributes the company’s success to sticking to the tried-and-true business model of investing in research and development and not transitioning to an acquisition model.

Witty told CNBC’s “Closing Bell” on Monday that the key is to be patient and to see the value of investing in innovation.

“What we have to stay focused on is the fundamentals of the value of innovation and discovery of medicines and vaccines that make a real difference to patients,” he said.

“We’ve been criticized by people at times for not being exciting enough in terms of embracing the new ideas of how to quickly move things forward. I think the reality of what we’ve seen is there aren’t any shortcuts,” Witty said.

The alternative acquisition model in the health care industry has drawn criticism during this election year. In theory, the M&A strategy can save companies significant sums as they can purchase mature, fully developed products without having to invest in R&D.

“We’ve turned our face away from some of the more novel business model approaches, which often times look interesting in the short run but don’t have legs in the long run,” Whitty said.

Looking forward, GSK wants to continue to innovate and replace their pipeline as older drugs go generic, a process that pressures the revenue streams of pharmaceutical companies.

“Over the last five or six years, we’ve successfully organically replaced about 60 percent of the revenue we had which has gone off patent … That pressure has been on, but we’re coming through that,” Whitty said.

By Christine Wang

Source: CNBC

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