Glaxo unveils plan to diversify

GSK hopes to diversify its product base

Global drugs giant GlaxoSmithKline (GSK) has unveiled plans to broaden its product base as it grapples with competition from generic drug makers.

New boss Andrew Witty laid out his strategy as profits slipped 3% in the second quarter from a year earlier.

Pre-tax profit in the three months to 30 June fell to £1.84bn ($3.7bn).

Mr Witty wants the company to shift away from relying on blockbuster prescription drugs and build on its vaccine and consumer health business.

GSK's profits were hit by poor sales of diabetes drug Avandia after US authorities warned that it could increase the risk of heart attacks. Avandia sales declined 46% in the quarter to £192m.

Diversify

Mr Witty took over from Jean-Pierre Garnier as the firm's chief executive at the end of May.

He plans to diversify the products made by GSK, which has traditionally relied on developing blockbuster prescription drugs to deliver profits.

The patents for many of these drugs will expire soon and with few new blockbuster drugs in the pipeline, Glaxo is more exposed to competition from generic drug manufacturers.

"It is clear that these challenges together with the evolving dynamics of our industry environment require fundamental changes to the way we operate," Mr Witty said.

In the future, Glaxo will concentrate on developing consumer healthcare goods - such as headache tablets and toothpaste - as well as vaccines and non-traditional medicines.

Disappointment

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said the results were disappointing, with only the new management's strategy offering some consolation.

"GlaxoSmithKline continues to entice investors with the possibility of potential new drugs and a growing focus on the emerging markets, but for now, underlying trading continues to deteriorate," he said.

Glaxo shares closed down 0.29%, or 3.5 pence, at 1220.5p.

To counter some of the competition from generic producers, Glaxo announced an alliance with a South African generic drug manufacturer Aspen Pharmacare.

The alliance will also help it target emerging markets, Glaxo said.