GSK in Indian drugs link-up.

By GEOFF DYER.
473 words
23 October 2003
Financial Times
25
English
(c) 2003 The Financial Times Limited. All rights reserved

GlaxoSmithKline underlined the growing interest from pharmaceuticals companies in India when it announced yesterday it was entering a wide-ranging research alliance with Ranbaxy, India's largest drugs company.

The Anglo-American drugs group, the second-biggest in the world, said it would collaborate with Ranbaxy in drug development projects in a number of therapeutic areas.

The alliance is the latest attempt by the western pharmaceuticals industry to tap India's large number of high-quality but low-cost scientists. Already there have been signs of companies outsourcing parts of their research operations and conducting clinical trials in the country, prompting predictions that India might replicate in drugs the success it has had in information technology.

Jean-Pierre Garnier, GSK chief, said the Ranbaxy deal was not an exercise in outsourcing. But, he added: "It is true that the economics of R&D in India are very different - $100m ( £60m) spent on research there would cost a lot more in the US or Europe."

Under the deal, GSK will have the rights to market any drugs that are developed in all countries other than India. While GSK will do most of the later-stage development work, they will work together on different parts of the discovery process.

"The idea is to combine their skill sets, which include excellent chemistry, with our technology infrastructure," Mr Garnier said.

The deal was announced as GSK revealed a 22 per cent rise in third-quarter earnings to £1.69bn, in line with expectations, after turnover rose 9 per cent to £5.47bn. But GSK shares fell 2.6 per cent to £12.64 on disappointment among some investors that the group did not increase its forecast for 2003 earnings.

Mr Garnier said generic competition would soon wipe out sales of its Paxil anti-depressant drug, but the new once-a-day version of Paxil had held market share since the launch of generics and was expected to grow.

Ranbaxy has been expanding rapidly in the US generics market in recent years. However, it is also trying to develop its own drugs.

Andrew Baum, a Morgan Stanley analyst in London who recently completed a report on the Indian sector, said the deal gave GSK a source of potential drugs and would help Ranbaxy develop its research capabilities. However, he did not expect a wave of outsourcing of drug research or manufacturing to India.

GSK said the US Food and Drug Administration was investigating a company manufacturing plant in Puerto Rico but added that the probe would have no impact on the supply of medicines. According to GSK, the FDA has not disclosed the exact nature of the investigation. Lex, Page 24 Lombard, Page 26 Takeda files suit, Page 32 China and western medicines, Page 32

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