When GSK welcomed Stiefel Laboratories into its family of specialist therapeutic groups, a world-leading dermatology company was born.

But the acquisition, which we completed in July 2009 for approximately £2.2bn, is also an excellent example of a company being the perfect fit – a purchase that allows us to grow a geographically-balanced business and product portfolio, while retaining the heritage of a company that has been going strong for 165 years.

Historically, GSK had a small dermatological portfolio of £300m, which was not a significant area of commercial focus but had the potential for a wide global reach. Stiefel’s products spanned most of the major segments of the dermatological markets including anti-acne, anti-psoriasis and corticosteroids, but the company had a limited reach outside of North America.

Our purchase of Stiefel allowed us to expand the commercial presence of the portfolio, utilise our manufacturing, distribution, and shared services, and advance innovation for dermatology from the GSK library of molecules. With the implementation of a global marketing approach, sales of global brands have grown within existing countries and expanded to new countries. Legacy GSK dermatology products have also benefitted from Stiefel’s speciality sales force and relationships.

The commercial presence across the combined portfolio has now grown to 135 countries, greatly improving access to treatments for dermatologic conditions. We have also seen benefits in R&D – a matter of months after the acquisition we identified 12 compounds as having potential in dermatology conditions. 

The acquisition has also generated cost savings of over £200 million in three years by reductions in administrative and manufacturing costs, as well as streamlining contract manufacturing and distribution agreements.

Identifying opportunities

The Stiefel purchase represents one of a small number of strategic business acquisitions that we have pursued on occasion to help us expand in a specific region or therapeutic area. On each occasion, the opportunity has been assessed against other investment options - such as share buybacks - to consider what makes most sense for us as a company, for our shareholders and also of course, for patients.

In each case we have created a more geographically-balanced business and product portfolio, and provided patients with broader access to medicines, while expanding our product offering into new areas.

Our focus recently has been in higher-growth areas such as emerging markets, vaccines and consumer healthcare, concentrating on smaller businesses with strong product portfolios. We have also sought opportunities where we will have a significant competitive advantage in the market through our ability to develop, manufacture, market and distribute products.

Every potential acquisition is carefully considered against other investment options. We also have strict financial rules in place to ensure that we are investing in the right opportunities and paying the right price.  

The acquisition of Human Genome Sciences (HGS) for example, which was completed in August 2012, made sense both from a business and patient perspective. In the course of our 20-year collaboration, GSK and HGS had jointly launched a new medicine for an auto-immune condition and were developing two other medicines in the area of diabetes and arterial disease. 

Adding HGS to the fold provided opportunities to simplify our business by creating a single owner to focus on these medicines and projects, remove duplication and allow us to focus more of our R&D investment on new medicines for patients. It also removed any potential royalty payments that would have been due to HGS under our development agreement.

Ultimately, we devote many hours to due diligence - to ensure we understand the risks and opportunities for each potential investment - and carefully assess the expected financial returns of a bolt-on acquisition.