GSK JOINT VENTURE-CHINA

GSK Joint Venture-China

GSK Joint Venture-China

Motives for GSK's Joint Venture Decision in China

GlaxoSmithKline and Shenzhen Neptunus Interlong Bio-Technique Co. Ltd. have entered into a definitive agreement to form a joint venture focused on developing and manufacturing flu vaccines for the Chinese market. GlaxoSmithKline, the UK-based pharmaceutical group has set-up a joint venture flu vaccine business in China. The company has combined forces with Shenzhen Neptunus, which is quoted in Hong Kong, taking an initial 40% stake for $34 million with the option to increase to majority control within two years. The deal allows GSK to enter the potentially large Chinese market for vaccines for the first time, overcoming the local authorities' preference to purchase vaccines from domestic manufacturers.

It gives the company access to Chinese antigens for flu, and allow them to add in GSK's proprietary 'adjuvant', a patented ingredient that boosts the human immune response, adding to the efficacy and efficiency of the vaccine. This is the first time GSK has created a joint venture in vaccines, with the company indicating that it would follow a similar model in other emerging markets in the future.

The venture will firstly be targeting strains of the virus specific to China, Hong Kong and Macau, the group said in a statement. GSK expects to make a cash contribution of approximately US$31 million in return for a 40 percent stake in the joint venture, whilst NIBT will contribute the equivalent of US$47 million in assets. Within five years of the establishment of a JV, GSK has the option to increase its equity interest to a majority stake in the venture.

The transaction marks the first time GSK has created a joint venture in vaccines, with the company indicating that it would follow a similar model in other emerging markets in the future. It heralds the latest in a series of investments and deals by large pharmaceutical companies into vaccines, which have become an increasingly important and lucrative way to diversify away from traditional “small molecule” chemical based medicines.

The agreement with Shenzhen allows GSK to substantially strengthen its expanding franchise in flu vaccines, adding to its existing fully controlled factories for flu in Lavalle in Canada and Dresden in Germany, as well as its central plant in Rixensart, Belgium, for the production.

The alliance will develop and manufacture influenza vaccines for China, Hong Kong and Macau. This will include vaccines for seasonal, pre-pandemic and pandemic influenza. It is expected that these vaccines will become available over the next few years. GSK will take a 40% stake in the joint venture and will contribute cash and assets equivalent to 21 million pounds. Shenzhen Neptunus will take a 60% stake in the joint venture and will contribute cash and assets equivalent to 31 million pounds.

The alliance will develop and manufacture influenza vaccines for China, Hong Kong and Macau that will include vaccines for seasonal, pre-pandemic and pandemic influenza. These vaccines are expected to become available during the next few years. GSK will provide access to its adjuvant system, which helps ...