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Glaxo's research and development chairman noted that the latest update shows just how far the company's oncology work has come. There is no denying this fact: The new concentration on cancer also reflects something else. Glaxo is shifting from its traditional pharmaceutical giant model and following a well-worn path carved out by the biotech industry.
Glaxo, like a lot of major drugmakers, has traditionally swung for the fences when it comes to R&D. This meant targeting medicines that offer large markets and recurring sales. The firm's marketed portfolio reflects this bias to some extent. Its top two sellers in the third quarter, Advair for asthma and Avandia for diabetes, target chronic conditions, and each addresses a market of more than 20 million people in the U.S. alone. These two drugs together accounted for almost 20% of Glaxo's revenue in the quarter. By contrast, the firm's cancer portfolio brought in less than 5% of revenue.
It's not surprising that Glaxo had neglected cancer. In recent years, oncology has been the domain of biotechs. Large pharmaceutical companies saw the area as more risky -- while cancer as a whole is a big killer, markets for individual types of cancer are not huge, and the opportunity for repeat sales is lower.
Glaxo is gearing up to change that division of labor. One of the drugs in late development, Tykerb, targets breast cancer, and as a result would compete with Genentech's
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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.