Glaxo takes 19% of Aspen after completing deal

Glaxo takes 19% of Aspen after completing deal

London: GlaxoSmithKline has taken a 19% stake in Africa’s biggest generic drugmaker, Aspen Pharmacare, after completing a strategic collaboration with the South African group, the companies said on Tuesday.

British-based Glaxo had originally said it would have a 16% holding when the deal was announced in May, but it has since bought additional Aspen shares.

The asset-swap deal expands Glaxo’s emerging market presence -- a key objective for chief executive Andrew Witty -- and cements an existing relationship between the two businesses.

Shares in Aspen hit a record 69.59 rand on the news and were 2.1% higher at 69.40 by 0825 GMT. Glaxo rose 0.7%.

Aspen has issued 68.5 million new shares to Glaxo in exchange for Glaxo’s manufacturing plant in Bad Oldesloe, Germany, and eight specialist medicines.

Taken together with Aspen shares bought by Glaxo between signing and closing, this issue takes Glaxo’s holding in Aspen to 81.7 million shares, equivalent to 19%.

Abbas Hussain, Glaxo’s head of emerging markets, will be appointed to Aspen’s board as a non-executive director from 7 December.

Selling branded generic drugs in emerging markets is a central plank of a drive by CEO Witty to diversify Glaxo’s business away from its traditional reliance on blockbuster medicines in Western countries.

In addition to the tie-up with Aspen, Glaxo also has deals with India’s Dr Reddy’s Laboratories and a number of Chinese partners.

Some analysts have questioned the strategy because of its potential to dilute margins. But Witty believes emerging markets are not fundamentally less profitable, since selling older medicines in these countries does not involve the large research spending needed to develop new drugs for Western markets.

Glaxo will brief investors on its plans for emerging markets at a 10 December seminar in London.