GlaxoSmithKline has signed an agreement with fellow UK firm Astex Therapeutics which could net the latter company over £300 million.

The deal means that Astex will apply what it calls its “world-leading fragment chemistry platform”, called Pyramid, to identify and develop new drugs against multiple therapeutic targets selected by GSK, The financial side of the agreement involves an upfront payment in Astex of £12.5 million in cash and £7.5 million in equity.

The Cambridge-based company is also eligible to receive development and regulatory milestones and total payments, excluding royalties, could reach over £300 million, if all programmes under the alliance are successfully developed and commercialised. Astex chief executive Harren Jhoti said that signing up GSK is another testament to the firm’s position as the leader in fragment-based drug discovery, “an approach that has established itself as one of the most significant advances in discovery chemistry in the past two decades.”

Diversification is profitable path – Witty
Meantime his counterpart at GSK, Andrew Witty, has been speaking at the Reuters Health Summit in New York, saying that he does not expect profit margins to fall substantially, despite an increased focus on diversifying into areas such as emerging markets and consumer health.

He told Reuters that profit levels in emerging markets are better than they might appear, saying that “it is by no means certain that our margins will significantly erode over time”. He added that “I feel very relaxed about the notion of having businesses at differential margins, provided they are delivering growth”.

Mr Witty also claimed that it is wrong to think emerging markets are fundamentally less profitable, since selling for example branded generics in these countries does not involve any R&D expenditure. "A lot of people miss that," he said.

Mr Witty also said that GSK is not interested in any major acquisitions and is looking more at bolt-ons in emerging markets, vaccines and consumer healthcare. However he acknowledged that it is hard to find good assets in the latter category.