Glaxo's Witty Touts Innovation as Best Defense for Drug Pricesby
Innovative drugs may be best defense against payer pressure
Company won't chase expensive deals for late-stage assets
As the pharmaceutical industry faces mounting scrutiny over drug pricing, GlaxoSmithKline Plc Chief Executive Officer Andrew Witty touted innovation as the best defense and pledged to highlight a product pipeline next month that would help withstand pressure from payers.
About 80 percent of the U.K. drugmaker’s pipeline is made up of first-in-class candidates, including an antibiotic in a new drug category to be discussed at a research and development presentation for investors on Nov. 4, Witty said at an event in London late Thursday.
Witty, now in his seventh year as CEO, is under pressure to highlight growth prospects amid a lagging share performance, sluggish U.S. sales and earnings declines. Meanwhile rivals such as Canada’s Valeant Pharmaceuticals International Inc., whose business model has been to buy companies with drugs already on the market rather than spending on research and development, have brought unwanted scrutiny to drug pricing in recent weeks.
“The market is becoming more selective,” Witty said. “We have to take on development risk” to yield innovative products.
No Costly M&A
That risk won’t involve expensive acquisitions for late-stage assets, however. Glaxo will continue to focus on early-stage deals and partnerships, mostly with universities, that offer better value, he said. While companies like Gilead Sciences Inc. hit it big with its $11 billion purchase of Pharmasset, which brought in the hepatitis C blockbuster Sovaldi, such successes are “one in a thousand,” and most acquisitions are “problematic,” he said.
Last year, Witty oversaw the biggest reorganization since the merger that created Glaxo 15 years ago. He sold the company’s cancer drugs to Novartis AG in exchange for the Swiss firm’s vaccines business and cash. The companies also formed a joint venture, controlled by Glaxo, to sell consumer health products.
Glaxo is scheduled to report third-quarter earnings on Oct. 28.