Disposals are trumping acquisitions as GlaxoSmithKline slims down ready for a wave of its new medicines to reach the market.
Britain's biggest drugmaker expects to sell operations this year with revenue of around 1 billion pounds ($1.5 billion), roughly the same as the volume of business acquired in the past five years.
It is a mismatch that Chief Executive Andrew Witty is happy to see continue as the company becomes more focused, increasing its leverage to new drugs coming down the pipeline.
"I think our proceeds from divestments will far exceed our acquisition costs," Chief Executive Andrew Witty told Reuters in an interview.
"The size of this company will be dictated by the success of the pipeline and we will continue to clip off bits of the business that we think are not core or are drags."
Although GSK is frequently mentioned as a potential acquirer of biotech and other companies, it is actually redeploying staff from scouting for new business to working on new products.
"Our energy around acquisitions and our machine around acquisition is the lowest it has ever been in the history of the company," Witty said.
That doesn't mean the deal tap is off completely, but any acquisitions are likely to be fill-ins in emerging markets or rare technology add-ons, like vaccine firm Okairos, acquired for $321 million last month.
The goal is to refocus the group toward new medicines, three of which, for cancer and lung disease, have already been approved this year.
Another three new drugs could get a green light by year-end and 14 more are due to report late-stage clinical trial results by the end of 2014.
OLDER DRUGS ON THE BLOCK
Witty's approach is evident in the planned sale of two substantial, but declining, anti-blood clot drugs to South Africa's Aspen Pharmacare announced last week. That deal could be worth around 700 million pounds.
Following a decision in April to bundle many older medicines into a separate unit, Witty said he expected further similar divestments.
"Within the established products arena I can see the next couple of portfolios that would be most likely," he said. "I'd be very surprised if you didn't see something more in '14 and '15. I don't expect to see anything else this year."
Outside pharmaceuticals, GSK is selling its Lucozade and Ribena drinks in an auction process set to be completed by the end of the year, which analysts believe will fetch more than 1 billion pounds.
The pragmatic attitude to sifting out slow-growing assets marks a change of mindset in the pharmaceutical industry, where CEOs have historically been anxious to protect their revenues.
Today, being top of the sales pile is no longer the main goal, in part because investors are demanding a more rigorous approach to capital allocation.
"If we drop two or three or five points down the league table, who cares? Because if that pipeline arrives and can drive leverage off this base, that is a prize worth having," Witty said.
Pfizer, too, has been blazing a similar trail in focusing operations under its new boss Ian Read.
Confidence has begun to build that the drug industry is moving to better times, having put the worst of a wave of patent expiries behind it and with the pace of new drug approvals now picking up.
That has helped make healthcare the global equity sector with the best total returns so far this year.
Not all drug companies are enjoying improved pipelines, however, and those with thin portfolios, like GSK's British rival AstraZeneca, remain firmly on the acquisition path with an increased appetite for deals.
Having eschewed hefty acquisitions, Witty says he will give investors back the cash that should roll in if the new drugs deliver as hoped.
Increasing the dividend, in particular, is "sacrosanct" and Witty expects GSK to remain an attractive yield play for investors, even as it becomes more of a growth stock again.
"There is a scenario where we could spin off enough cash to drive the dividend and, even with a view on what the shares might do, you could expect us to remain a relatively high dividend stock," he said.
GSK shares currently offer a dividend yield of more than 4.5 percent, the second highest after AstraZeneca among global drugmakers.
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