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GlaxoSmithKline Reorganizes to Emphasize Emerging Markets

 May 05, 2008 03:05 PM
 


GlaxoSmithKline (NYSE: gsk) has reorganized its corporate structure to put an increased focus on emerging markets. The moves have the blessing of new CEO Andrew Witty, who will take over the giant pharma on May 22.

A new management group was given the charge of increasing business in the Emerging Markets, defined as China, Russia, Brazil, India and the Middle East. The group will be led by Abbas Hussain, who is moving to GSK from Eli Lilly & Co. Even though the countries are not closely linked geographically, GSK believes the structure of the pharmaceutical markets in each nation is very similar, allowing for a unified strategy.

Witty remarked that this Emerging Market will produce about 25% of the overall growth in pharmaceuticals world-wide in the immediate future and probably a bigger percentage further in the future. Part of the Emerging Market Group's brief is to establish more business relationships, which will be good news to the biopharmas that are already operating in these regions.

GSK will also form an Asia Pacific that will be in charge of Japanese and sales. Previously, all areas of GSK's sales outside of its key markets were lumped together in an International division.

Like other big pharmas, GSK has been struggling in the last few years as it loses its chief moneymaking products to generic competition. GSK suffered an additional setback when its diabetes drug, Avandia, was found to have a greater incidence of safety problems than previously thought.

GSK is not afraid to spend money to acquire drugs and technology. It is currently seeking to buy Sirtrus Pharma (NSDQ: sirt) for $720 million, an 84% premium to the price at which Sirtrus was trading before the takeover offer. Sirtrus works with chemical compounds known as sirtuins, which are activated by a low-calorie diet and may provide the same benefits as a low-calorie diet without requiring patients to actually restrict their caloric intake. The lead compound for Sirtrus is in clinical trials for Type II diabetes. The compounds may also have a positive impact on overall longevity.

In December 2007, GSK announced it would increase its investment in its Shanghai R&D center from $40 million to $100 million, with the goal of having 1,000 staff members in place by the end of 2010.
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