More growth, less risk. The joint venture announced on Tuesday between the UK's biggest drugmaker and Shenzhen Neptunus, a Chinese vaccine maker, bears all the hallmarks of GlaxoSmithKline's push to diversify sales under chief executive Andrew Witty.
GSK's outlay is small. It will invest £21m to acquire a 40 per cent stake in its first vaccines joint venture, while Hong Kong-listed Shenzhen will invest £31m for 60 per cent. In return, GSK will gain access to several regionally specific flu antigens. That should speed the search for jabs for the Chinese market – an effort that has taken on fresh urgency following the outbreak of swine flu in 69 countries this year. Even more important, GSK will gain a local sales partner. That is crucial in China, where local companies often enjoy an advantage negotiating sales with the government.
For investors, a few cautions are in order. First, flu jabs remain a relatively small and low-margin part of GSK's vaccines business – UBS reckons they will account for less than 10 per cent of GSK's estimated $5.2bn of vaccine sales this year. Second, while vaccines are an important part of Mr Witty's growth strategy, it will take time for the Chinese joint venture to bear fruit. GSK said on Tuesday the project's first vaccines would be available “over the next few years”.