12/01/2015 14h30

GlaxoSmithKline gets ready to double in size in Brazil in 5 years

Valor International

GlaxoSmithKline, the world’s sixth largest pharmaceutical company, saw its businesses double in size in Brazil over the past five years by redirecting its strategy for growth with economies of scale, even if it meant reducing profitability. Now, consolidated in the third position in the Brazilian market, considering also sales to the government, the British group wants to double revenues again in five years in the country, which are currently around R$3 billion a year.

Cesar Rengifo, president of GSK for Latin America and the Caribbean, said the formula to reach this target must contain the same ingredients that have driven the group’s business in recent years: scale and innovation. "We are an innovative company. But we also bet on volume, because innovation without access does not allow the company to fulfill its social role," the executive said.

A share of GSK's growth in the last five years also came from acquisitions, such as US firm Stiefel in 2009 and an asset swap with Novartis more recently. While it consolidated the vaccine business of Novartis, GSK transferred its oncology business to the Swiss company, with both companies agreeing to create a joint venture combining their consumer-products units. The transaction was concluded in early November.

At the Brazilian facilities, the business model focused on innovation and volume led to a R$200 million investment in the Guarulhos (São Paulo) and Jacarepaguá (Rio de Janeiro) plants. Another R$130 million will be applied into modernizing the units and building a new distribution center in the country, budgeted at around R$30 million. “We're evaluating when to kickstart this project,” he says.

By jettisoning the search for margins, Mr. Rengifo says, GSK, which owns brands Sensodyne (toothpaste), Sonrisal (anti-acid) and Clavulin (antibiotic), had to redouble the search for sales efficiency and expansion. The strategy didn't include a potential incursion into generic drugs. “The generics business model is based on production scale gains. GSK is also focused on innovation,” he says. 

In the search of innovative molecules, GSK has made a new partnership with state-run research foundation Fapesp, through the creation of two Centers of Excellence in Research in São Paulo.

The first, based at the Federal University of São Carlos (UFSCar), will be focused on developing new technologies in sustainable chemistry, which could be applied by different industries and not only the pharmaceutical one – GSK itself aims to reach 2030 with a neutral impact on the environment.

The second one, at Butantan Institute, in São Paulo, will target the validation of molecules that enable the creation of new drugs for inflammatory-based diseases. Research will center on studying poisons, animal secretions and purified toxins.

Selected through two public procurement for proposals launched in 2014, the projects will receive investments of R$88.4 million for the development of studies over the next ten years. Of this amount, Fapesp and GSK will split a R$34.6 million investment. The host institutions will invest the other R$53.7 million. GSK already invested R$20 million in the partnership's first stage.

By expanding local partnerships, the company's director of basic research for emerging markets and head of the Trust in Science program, Isro Gloger, says that GSK is reinforcing the goal of attaining a complete innovation model in Brazil. “These investments are high risk, with 20-year cycles or more. And the research's results go to the scientist.”

GSK sales reached 23 billion pounds in 2014, of which 1 billion pounds came from Latin America.