Big Pharma turns its attention to China
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Big Pharma turns its attention to China

GlaxoSmithKline (GSK) and its peers are setting their sights on China. The world’s major drug makers (along with GSK, only three other companies really fit the bill: Merck, Pfizer, and Sanofi Pasteur) are looking for lucrative new markets, and China has everything they need: a huge customer base, rising incomes, a fast-growing appreciation for what those incomes can buy in other parts of the world, and an aging population. Sounds like a great place to start shipping vaccines? You bet!

GSK’s share price has remained mostly flat so far this year, edging up by 1%

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Source: Yahoo Finance

Take, for example, GSK’s market-leading shingles vaccine, Shingrix. At the end of last year, sales of this treatment doubled. The vast majority of the population is susceptible to shingles (it’s caused by the same virus that gives you Chicken Pox – so if you had that as a child, or have been vaccinated against it, you are susceptible to shingles). But most of us don’t start suffering its ill-effects until later life, when our immune systems are gradually compromised by the simple fact of aging.

So, who wouldn’t want vaccination against shingles? Most of us are susceptible, and most of us are living longer – it’s easy to see the appeal. But of course, in the west, that has been the case for many years. In China, however, patients are only just beginning to realise how much more quality of life their newly-increased incomes can buy them.

GSK just has one problem… a massive scandal six years ago that led to multiple arrests and a big fine. New CEO Emma Walmsley, and the majority of her top team, don’t go that far back. And she’s eager to draw a line under the past and start building a future in China.

Discussing that move earlier this year, Walmsley said: “I’m very confident in a long-term thriving vaccine industry in China, we want GSK to be part of it and to be a partner to bring new vaccines into the market. This country believes in prevention philosophically, apart from clean water vaccines have been the most powerful protector for human life.”

Disclosure

Dominion holds GlaxoSmithKline in its Global Trends Managed Fund.


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