As part of its ongoing attempts to penetrate the emerging markets, GlaxoSmithKline has signed an innovative pneumococcal vaccines deal in Brazil, which also includes a technology transfer and R&D investment. As well as boosting the pharma giant's volume in this rapidly growing and commercially attractive market, the deal is expected to increase access to vaccines in the country.
GlaxoSmithKline is no novice at going against the grain and with its fervent targeting of the fast-growing and commercially attractive emerging markets the pharma giant is currently at the forefront of the industry's evolving business model. Its recent partnership with Brazil's Ministry of Health has confirmed that the company intends to continue with this strategy, differentiating itself from its peers in the process. Even though it may not see significant sales in the short term, the long term, high volume potential of the market will drive growth: an innovative strategy that few are willing to take.
Following from its partnership with Indian generics player Dr Reddy's and its purchase of Bristol-Myers Squibb's unit in the Middle East, GlaxoSmithKline has signed a long-term contract with Brazil's Ministry of Health for $2.2 billion. The company will supply enough doses of its pneumococcal vaccine Synflorix to vaccinate 13 million children each year for at least the next eight years, starting at a reduced price of $16.90 per dose, and gradually declining to $7. Under the deal, GlaxoSmithKline will also include a technology transfer, allowing Brazil to eventually manufacture the vaccine itself. Furthermore, the company will also invest $51m to develop a dengue fever vaccine.
The deal is significant as it will strengthen the Brazilian pharmaceutical market and increase access to vaccines, but it also reflects GlaxoSmithKline's strategy of moving away from small molecule drugs and towards higher value products. In addition, the company already has experience of using price-reduction deals in the emerging markets to stimulate long-term volume growth. In March 2009, GlaxoSmithKline reduced the price of some of its major drugs by 30-50% in the Philippines in an effort to increase access to its medicines. It is through deals such as this, and other partnerships with healthcare organizations that GlaxoSmithKline has been the leading foreign company in the Philippines. The vaccine partnership in Brazil has a similar potential, and could catapult the company into a commanding position in this market given that it currently holds 14th position in terms of size.