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GlaxoSmithKline (GSK)
GlaxoSmithKline Ends One Partnership, but Starts Another
Over the years, pharmaceutical company GlaxoSmithKline has engaged in partnerships with many other companies, working together to develop a number of different pharmaceutical products. Some have failed, while others have succeeded, which is a common result in the medical field where it takes a lot of experimentation and evaluation to judge the performance of any new drug. GlaxoSmithKline's announcements this morning were symbolic and indicative of the ups and downs that they themselves, as well as many other companies, have gone through throughout the years.
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One of Glaxo's announcements was the proclamation of a new partnership with Dr. Reddy's Laboratories Ltd. (RDY: Charts, News, Offers). Dr. Reddy's is a pharmaceutical company based on India, and the two companies have decided to work together to develop and market new and existing products in some areas where the companies are not currently focused. These products will be developed by Dr. Reddy's, and probably co-marketed by both companies, and the new partnership will be targeting these products in Africa, the Middle East, Asia Pacific and Latin America. Full details of the deal have not yet been released, but the deal will allow both companies to expand their reach, and take advantage of each other's strengths.
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At the same time, Glaxo also announced that they were ending one of their other partnerships, with Synta Pharmaceuticals Corp. (SNTA: Charts, News, Offers). The two companies had been working together to develop a cancer treatment drug known as elesclomol. The drug was being proposed for use metastatic melanoma - skin tumors. The results from the drug trial were disappointing, with no significant increase in survival rates when a patient was given this drug; and despite a slight potential improvement, the safety concerns over this drug outweighed the still unknown potential benefits. Synta has announced that although the two companies will stop working together within the next few months, they will still be analyzing the results from the trial, and Synta will make the final decisions regarding the future of elesclomol. And although any rights to the drug will now remain with Synta, if Synta does move forward with the drug, Synta will likely still pay a small royalty to Glaxo due to the conditions of their previous agreement.
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Again, these announcements show just how easily the status of projects can change in this volatile field. A project which could have netted Synta over $1 billion from Glaxo upon success is now facing a very uncertain future - the company has only received $130 million, and is left with a questionable cancer treatment drug. And a new partnership has been forged between Glaxo and Dr. Reddy's, which will lead the two companies into some new areas, which is always inherently risky. However, large companies such as GlaxoSmithKline often have the resources to take these chances, and although some may not work out, the ones that succeed can sometimes more than make up for the failures. So although Glaxo's investors are somewhat cautious this morning, sending shares down, they should keep their eyes on this and any other existing partnerships, to see if this might be the next big success.
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