GSK on hunt for drug deals in China

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GSK is on the hunt for deals in China after the UK drugmaker rebuilt a “very strong” relationship with the government and local companies since a corruption scandal a decade ago.

Chief commercial officer Luke Miels told the Financial Times that the company was working on further deals with Chinese companies after it signed a licensing agreement in October worth up to $1.5bn for a cancer drug developed by Hansoh Pharma.

The same month, GSK agreed a $3bn distribution deal for its shingles vaccine with China’s Zhifei, which may be expanded to cover its new vaccine that protects against the common respiratory syncytial virus, if it is approved by Chinese regulators.

Miels said that the country’s high standards of chemistry made it a good hunting ground. “You can find molecules in China and [often] the Chinese companies just want the [domestic] rights so you can negotiate . . . [to] take it globally.”

GSK has had a much smaller business in China than its rival AstraZeneca, partly because of a scandal more than a decade ago over GSK sales staff bribing doctors to prescribe its medicines. GSK was fined £300mn in 2014 and dismissed more than 100 staff in China. 

Miels said that the pharmaceutical company has since “rebuilt” its business in China. 

“So you have to tread carefully anywhere, you’re in a regulated industry, but I don’t think it’s something that is in the forefront for us now,” he said. “Our relationship with the government, with local companies, is very strong. I think we’ve moved, we’ve changed the team, we’ve got a good record in China,” he said. 

Shares in GSK have fallen 5 per cent in the past five years, while many of its European rivals including Novo Nordisk, AstraZeneca and Novartis have soared. The company has yet to convince investors that it can meet its long-term revenue targets and is also contesting a series of lawsuits alleging that its heartburn medication Zantac causes cancer, which it denies. 

Miels said the company intends to do as much global M&A in 2024 as it did this year. GSK reached five deals in 2023, including acquiring Bellus Health for $2bn, three licensing agreements and the vaccine partnership with Zhifei.

It is looking in particular for smaller bolt-on deals in its specialist areas such as respiratory and infectious diseases. These could be found for “an attractive price”, said Miels. 

But he ruled out bidding for companies with potential obesity treatments, despite surging sales of weight loss and diabetes drugs sold by Novo Nordisk and Eli Lilly. He said GSK did not have the “internal capabilities” to invest in the new generation of drugs, called GLP-1s. 

“I think that Lilly and Novo are well advanced and any products likely to come in would have to have significant differences. What you are more likely to see is fast followers,” he said. 

In November, AstraZeneca announced it had reached a licensing agreement for the global rights to a next generation version of a GLP-1 developed by China’s Eccogene. This month, Roche agreed to buy Carmot Therapeutics, a US start-up with potential GLP-1 drugs, for up to $3.1bn.