British pharmaceutical giant GlaxoSmithKline (GB:GSK) seeks to further strengthen its connections in the world’s most populous country, China. The reason, as put forth by GSK’s chief commercial officer Luke Miels to the Financial Times, is that China has “high standards of chemistry.” The mainland is home to a multitude of molecules needed to manufacture drugs, making it an attractive place for research and development. Plus, Chinese companies often want only the domestic rights of the drugs while the partner can seize its global marketing and distribution channels, Miels added.
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The FTSE 100-listed company is a multinational pharma and biotech player, standing among the world’s ten largest pharma companies. GSK specializes in several therapeutic classes, including respiratory, oncology, and antiviral, as well as vaccines and consumer healthcare products. Year-to-date, GSK shares have gained 2.3%.
Here’s How GSK Intends to Leverage China
GSK often partners with other drug companies to test and develop ground-breaking medicines. Keeping China’s rich resources in focus, GSK hopes to sign several deals with Chinese pharma companies to bolster its growth. Recently, GSK signed a US$1.5 billion licensing deal with Chinese cancer drug developer Hansoh Pharmaceutical (HK:3692). Also, the company entered into a US$3 billion distribution deal with China’s Zhifei for its shingles vaccine Shingrix in China.
After facing a penalty for fraud in 2014, GSK has made concentrated efforts to rekindle its relationship with the Chinese government and companies. Miels acknowledged the regulatory nature of the pharma sector and noted that “I think we’ve moved, we’ve changed the team, we’ve got a good record in China.” GSK is in pursuit of signing multiple deals in China and paving the way for its future growth.
Is GSK a Good Buy?
On TipRanks, GSK stock has a Hold consensus rating based on three Buys, four Holds, and three Sell ratings. The GlaxoSmithKline share price target of 1,525.38p implies 6.6% upside potential from current levels.
