Sector News

GSK chief sees cheap money spurring ‘poor choices’ in pharma M&A

May 13, 2015
Life sciences
As pharma companies jump left and right at dealmaking opportunities, GlaxoSmithKline CEO Andrew Witty is scratching his head.
 
The way he sees it, superlow interest rates–in other words, cheap money–are spurring companies to make “poor choices” in the M&A arena, including “stretched” valuations, he told the Financial Times–and he’s not about to get involved.
 
“We’re not going to get drawn into the idea that just because money is cheap we can do anything,” he told the paper.
 
Since the start of last year, biopharma has struck a whopping $460 billion worth of deals, the FT notes, and Witty thinks that signals some buyers won’t end up seeing the returns they were hoping for when they shelled out on hot drug prospects.
 
“Either only a few will make it and you get really good rewards, or lots will make it, in which case competition is going to bring the price down. In either scenario, the model that says everybody succeeds and everyone gets maximum returns doesn’t work,” he said.
 
Of course, that’s not to say Glaxo has stayed completely out of the deal boom. It’s hard to forget the multibillion-dollar asset swap it inked with Swiss rival Novartis last year, which, at a combined $23.05 billion, ranked third on pharma’s list of 2014 transactions.
 
But like his current attitude toward M&A, that pact signaled that Witty–and Glaxo, by extension–was marching to the beat of his own drummer. The agreement set up a GSK-controlled OTC joint venture and sent the company’s cancer meds–which many drugmakers count among their prized possessions–across the continent in exchange for most of the Basel-based drugmaker’s vaccine assets.
 
“It’s as if GSK is playing string music just as the market is getting into drum and bass,” one healthcare analyst told the Times.
 
The thing is, the British pharma giant will now be relying on two traditionally low-margin businesses–vaccines and consumer health–to stay afloat, with aging respiratory behemoth Advair taking a huge toll on the company’s pharma unit. And while Witty says sales volume can make up for lower prices, some industry watchers aren’t convinced.
 
“Mr. Witty is running out of time,” Stephen Bailey, a fund manager at Liontrust Asset Management, told Bloomberg earlier this month. “He’s either got to deliver in the next 12 months or step aside.”
 
By Carly Helfand
 

Related News

September 18, 2020

Eli Lilly, Amgen join forces to scale production of COVID-19 antibody cocktails

Life sciences

Months of fervid research have whittled away most potential options to treat patients with COVID-19, a group of antibody cocktails still hold promise. Eli Lilly believes so strongly in its contender that it’s […]

September 16, 2020

Takeda unveils new Boston R&D manufacturing center for cell therapy pipeline push

Life sciences

Japanese drugmaker Takeda has trumpeted its plan in recent years to cut billions of dollars in costs and pivot around oncology and rare diseases. A key part of that strategy […]

September 15, 2020

AstraZeneca, Oxford restart stalled COVID-19 test as Pfizer ramps up trial numbers for its vaccine

Life sciences

Just under a week after it stopped its key phase 3 pandemic vaccine test, AstraZeneca and the University of Oxford have been given the green light to restart in the […]