GSK's $3.2B bet on pandemic pays off

GlaxoSmithKline has been all over the news lately, as the drugmaker racks up order after order for its pandemic flu vaccine. But it's not just the vaccine that's boosting Glaxo's pandemic sales. The most recent estimates have GSK reaping some $4.8 billion from the pandemic, between its Pandemrix vaccine, its Relenza antiviral drug, and other products such as antiviral face masks and flu diagnostics.

And as the Wall Street Journal reports today, none of this happened by accident. As virologists and other experts predicted the eventual evolution of a novel flu virus, the company spent more than $3.2 billion to build up its pandemic-related offerings. It was the kind of all-in bet that can pay off big--or fail big.

With the H1N1 pandemic in full swing, no one's arguing the latter. Indeed, some analysts are looking beyond the immediate "windfall" to long-term government stockpiling of antivirals and vaccines. "That is more likely to provide the drugs companies with recurring revenues, and it is that that has got the investors more excited," one told The Independent.

In fact, it's been so successful that some are accusing Glaxo of profiteering on the epidemic. As the WSJ notes, Glaxo caught criticism of its $10-per-dose charge for the vaccine, paid by the U.K. government. U.K. press claimed the shot only cost $1.60 to make. But CEO Andrew Witty brushes off such charges.

Rich countries are indeed paying about that price, Witty says, but the margin isn't anywhere near that large, especially factoring in the cost of R&D. And Glaxo has pledged 50 million H1N1 shots for use in poor countries. "Swine flu is going to be positive for performance, but only because we have put ourselves in a position to do it," Witty recently said. "And we have done that by taking very significant risks over a long time, diverting a huge amount of resource to it and doing the research that nobody else has done."

- read the WSJ story
- get more from The Independent