London - GlaxoSmithKline may find its next acquisition target where it found the last two: among more than a dozen companies it collaborates with to develop new treatments.
Glaxo has stakes in more than 10 publicly traded companies, including DiaDexus, which develops diagnostics for detecting heart attack and stroke risk, according to data compiled by Bloomberg. The London-based drug maker also has stakes in an undisclosed number of closely held businesses.
Glaxo this year has agreed to buy the 80 percent share of Cellzome it didn't own, made a hostile bid for Human Genome Sciences and increased its stake in Theravance. Glaxo had existing relationships with all three. Boosting revenue and profit growth by looking to smaller rivals with promising products or technologies is an industry-wide trend as large companies face generic competition.
"This is one of the smartest things that can be done with M&A strategy," said Gbola Amusa, a health-care analyst at UBS AG.
"As innovation-based M&A is sometimes a market for lemons, a buyer is typically at an information disadvantage to a seller. When there is a collaboration, however, there's the potential to have the same information or more than the target."
Glaxo didn't already own a stake in Sirtris Pharmaceuticals when it acquired the U.S. company for $720 million in 2008. Two years later, Glaxo stopped development of Sirtris' leading drug candidate, designed to mimic the benefits of red wine, after studies showed minimal efficacy against cancer and some patients developed kidney damage. Glaxo is conducting trials of other compounds acquired through Sirtris.
Glaxo stock has returned 11 percent in the past year, compared with a 8.3 percent gain in the Bloomberg Europe Pharmaceutical Index of 18 companies.
The company said it considers smaller acquisitions that fit its business and provide an attractive return compared with share repurchasing or dividends.
Among companies Glaxo has stakes in are Anacor Pharmaceuticals, with which it's developing an antibiotic for infections caused by Gram-negative bacteria, and Octoplus, which offers drug-delivery technologies for biological compounds. Glaxo in August agreed to buy a 25.4 percent stake in closely held Autifony Therapeutics, which studies hearing-loss treatments.