Glaxo Plans Two `Small' Deals; Competition Pushes Up Price of Acquisitions
Recent financial-market turmoil hasn’t led to any “great bargains,” Witty said in an interview at the London office of Bloomberg News today. The executive, who has focused mostly on transactions of less than $1 billion since taking the job two years ago, said prices are still being pushed up by competition. He declined to elaborate on the planned acquisitions.
“We’ve done very few deals between October last year and the last couple of weeks because we saw a number of companies, but we couldn’t get to a price that made sense for our shareholders,” Witty said. “I’m not going to overpay for these companies. We’ve walked away from five.” The company is working on “one or two others that you’ll hear about soon enough.”
Witty’s comments underscore the competition for new treatments as drugmakers try to replace revenue lost to generic medicines. Pharmaceutical companies have announced $42.3 billion of takeovers this year. The value of acquisitions declined from $132.2 billion in the same period last year, when two of the industry’s biggest deals -- Pfizer Inc.’s acquisition of Wyeth and Merck & Co.’s purchase of Schering Plough Corp. -- were announced.
Glaxo bought two small companies in December, paying 26 million pounds ($38.2 million) for Algerian drugmaker Laboratoire Pharmaceutique Algerien and 87 million pounds for NovaMin Technology Inc. of the U.S. Glaxo in March paid 29.2 million pounds to boost its stake in JCR Pharmaceuticals Co. to 25 percent, bolstering the company’s position in Japan and deepening its ties with a developer of treatments for patients with rare diseases.
“You only need one other person to want the company and then you’re going to have to pay for it,” Witty said. “So I don’t believe there are any great bargains out there.”
Witty’s comments echo remarks in September by Moncef Slaoui, Glaxo’s head of research. The search outside the company’s own laboratories for new drugs is getting more difficult because of increased competition from rivals “desperate” for novel treatments, Slaoui said then.
A study in one of Glaxo’s most promising research areas was halted this week when the company said kidney damage developed in some patients in a trial of SRT501, a drug in a class of enzymes called sirtuins that are designed to mimic the benefits of red wine. Glaxo acquired the compound with the $720 million purchase of Sirtris Pharmaceuticals Inc. two years ago. “All the work we’ve done since acquiring the company reassures us it was a good thing to do,” Witty said. The study was “stopped for reasons which really we think were unrelated to the drug and it will have no impact at all” on other projects in the drug class, he said.
Witty also said that the risk-benefit profile of the diabetes treatment Avandia “remains positive,” based on the information now available to the company. Glaxo faces more than 2,000 lawsuits filed on behalf of Avandia users in courts across the U.S. after the drug was linked to an increased risk of heart attacks in a 2007 analysis published in the New England Journal of Medicine.
The drugmaker will continue to defend keeping Avandia on the market at a July meeting of a U.S. Food and Drug Administration advisory board, Witty said.
Sales of Avandia, which brought in about 1.4 billion pounds in 2006, plummeted to 462 million pounds in 2009.
“The only thing I ask for is that qualified scientists with the right evidence and data calmly look at the information,” the CEO said. “The company’s done all the right things in terms of sharing that data with the regulators, working with the regulators to update the label.”