June 9, 2009 / 6:38 AM / 10 years ago

UPDATE 3-Glaxo forges Chinese JV to make flu vaccines

* Vaccine alliance with Shenzhen Neptunus

* Glaxo to take 40 pct initially, majority within 2 years

* JV to make flu vaccines for China, Hong Kong and Macau

* Deal bolsters Glaxo position in key emerging market (Adds detail on Singapore plant opening, shares, background)

By Ben Hirschler

LONDON, June 9 (Reuters) - GlaxoSmithKline (GSK.L), the world’s second biggest drugmaker, has forged an alliance with Shenzhen Neptunus to make flu vaccines for China, boosting its presence in a key emerging market.

Glaxo will take an initial 40 percent stake in the joint venture for a contribution of cash and assets equivalent to 21 million pounds ($34 million), it said on Tuesday.

It will buy additional shares to obtain majority control within the next two years.

The British-based drugmaker is already one of the world’s leading producers of flu vaccines and the deal secures it a position in the important Chinese market at a time when demand for flu immunisation is soaring.

WestLB analyst Simon Mather said the joint venture would also enable Glaxo to leverage its adjuvant, or vaccine additive, technology, which makes vaccines more effective. Using an adjuvant increases the number of doses of vaccine that can be made with a smaller amount of antigen, or active ingredient.

Over the next few years, the new alliance will supply seasonal, pre-pandemic and pandemic flu vaccine for China, Hong Kong and Macau. Both companies plan to make further investment in manufacturing.

“This deal is a further demonstration of CEO Andrew Witty’s desire to increase exposure in the emerging markets ... at a time where the threat of a global swine flu (H1N1) pandemic remains real,” Mather said.

The tie-up with Shenzhen Neptunus follows last month’s deal for Glaxo to take a 16 percent stake in Africa’s biggest generic drug maker, Aspen Pharmacare (APNJ.J).

Glaxo is also stepping up its investment in other vaccine areas in Asia, opening a plant in Singapore on Tuesday to make bulk supplies for its new pneumococcal vaccine.

The new Singapore facility, which is expected to manufacture its first commercial lots in 2011, is Glaxo’s first primary vaccine manufacturing facility in Asia.

Glaxo, like other big flu vaccine manufacturers, such as Sanofi-Aventis (SASY.PA) and Novartis NOVN.VX, has seen extra demand for flu vaccine this year to deal with the spread of the H1N1 strain of disease, which is now on the verge of becoming a pandemic.

WestLB currently forecasts Glaxo’s vaccines business will generate sales of 3.1 billion pounds in 2009, up 23 percent on 2008, and as much as 3.7 billion if the company can supply recently announced European government orders for pandemic vaccine by the end of the year.

Shares in Glaxo were up 0.8 percent by 0815 GMT, in line with a firmer European stock market. (Editing by Dan Lalor and Elaine Hardcastle) ($1 = 0.6230 pounds)

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