GSK bolsters presence in South Korea

GlaxoSmithKline has followed through with plans to expand into emerging markets by striking a co-marketing deal with South Korea’s largest drugmaker.

The UK company will pay £74 million for a 9.9% minority stake in Dong-A Pharmaceuticals as they enter into a strategic alliance together, reinforcing a deal to share profits on their joint primary care products in South Korea, which they will co-promote.

Under the terms of the agreement the companies will share profits generated from the co-promoted products above pre-agreed baselines. A new business unit will be created within Dong-A to manage the collaboration.

Christophe Weber, senior vice president & regional director of Asia Pacific, GSK said: “With Dong-A’s market-leading position and expertise in Korea, this alliance presents a significant opportunity for GSK to extend its commercial footprint and build operational scale in this fast growing Asian market.”

Listed on the Korean stock exchange since 1970, Dong-A has a portfolio of proprietary, generic pharmaceutical products and consumer healthcare brands. It reported total sales of £414 million in 2009 and owns Stillen, a treatment for Gastritis that’s the top selling patent-protected drug in Korea.

Dong-A itself was built largely on the success of a big OTC product called Bacchus, a taurine-based energy drink that it has been selling for 44 years. Sales have been declining as the population has become more health-aware and the company has been looking for business opportunities. These include generics, and Dong-A has copycat versions of Lipitor, Cozaar and Aricept in development.

The Korean pharmaceutical market, combining both ethical and over-the-counter sales, has consistently enjoyed double-digit growth over the last few years and in 2008 was ranked 13th largest in the world. IMS forecast continued through at approximately 10% CAGR through to 2012.

GSK’s tie-up with Dong-A follows other deals in recent months to acquire drugs in fast-growing markets like Pakistan and Egypt, and also license a wider range of off-patent medicines produced by low-cost manufacturers such as Aspen in South Africa. The alliance with Dong-A means they get to expand their portfolio without the costs (and perhaps risks) of a full acquisition.

Won-Bae Kim, president of Dong-A, said: “Together with GSK, we have built an excellent win-win alliance. This collaboration is expected to improve our market competitiveness in the fast changing domestic and global pharmaceutical markets. It will enable us to accelerate our transformation into a true global player taking advantage of GSK’s excellent product pipeline as well as their global marketing/operational expertise and standards.”

Brett Wells