Glaxo's Global Growth Gambit

GlaxoSmithKline (NYSE: GSK  ) has been stuck in rebuilding mode since last year, when its diabetes treatment Avandia took an unexpected sales hit over new safety issues. As the company prepares for the May 22 arrival of new CEO Andrew Witty, it's announcing even more upcoming changes and personnel shifts.

The company plans to rejigger its executive management team and increase its focus on selling pharmaceuticals in emerging markets. These vague proposals sound nice, but hasn't Glaxo been pursuing greater global growth already? Without specifics, determining these plans' feasibility seems difficult.

No drugmaker can increase its presence in new markets without hiring new local sales staff and other employees, but any spending spree Glaxo launches in emerging markets will be a little ironic. Only six months ago, outgoing CEO JP Garnier warned of a potential 1.5 billion British pounds in restructuring charges. Garnier also advocated more job cuts and other cost-cutting measures to "streamline" Glaxo's operations and improve its productivity and research and development efficiencies.

In contrast, Witty has emphasized building GSK's business through new partnerships, and he may form a new team to investigate possible deals. Sounds like a move right out of Johnson & Johnson's (NYSE: JNJ  ) playbook, although Glaxo's already no stranger to moderate acquisitions. Just a week ago, the company announced plans to acquire Sirtris Pharmaceuticals (Nasdaq: SIRT  ) for around $720 million in cash.

We'll have to see what this emphasis on growth through dealmaking and new markets means for Glaxo's future. However, if Glaxo's truly interested in expansion, multiple development-stage pharma executives are doubtlessly cheering now -- and envisioning premium prices for their compounds and companies.


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