The merger of Glaxo India, Burroughs Wellcome, and SmithKline Beecham Pharma will create the second largest pharmaceutical company in India, based on the results for the year ended 31 December 1998, after Ranbaxy Laboratories, with its sales of Rs 1,382.06 crore. The new entity will have combined net sales of Rs 1,278.26 crore (not counting the sales of SmithKline Beecham Consumer Healthcare).
Glaxo Wellcome holds 51 per cent in Glaxo India and Burroughs Wellcome India, while SmithKline Beecham is a 40 per cent affiliate of the UK-based parent.
Nutritional products will stay out
SmithKline Beecham Consumer Healthcare, or SBCH, is unlikely to be a part of the merger in India. This is because the parent companies have decided to sell their worldwide nutritional business as part of their merger plan. SBCH India is a 40 per cent subsidiary of SmithKline Beecham plc. Glaxo India has already sold its consumer business, which comprised popular brands such as Complan and Glucon-D, to Heinz India.
SmithKline's consumer business in India comprises of nutrition drinks (Horlicks, and Boost, which together account for a 63 per cent share of this market); oral care products Aqua Fresh toothpaste and tooth brushes; and over-the-counter products Crocin and Eno.
Large market share
In terms of retail drug sales, the merger of Glaxo, Burroughs Wellcome and SmithKline Pharma would further widen the gap between the number one company and the rest of the top five drug companies in India. According to the IMS 1999 audit (Dec 98 to Nov 99), the merged entity will have combined annual sales of Rs 1,084.87 crore and a 7.92 per cent share of the Indian pharmaceuticals market.
Market leader Glaxo's IMS audited sales were Rs 879.36 crore, while SmithKline recorded a retail turnover of Rs 205.51 crore. SmithKline Beecham Pharma is ranked 20 in terms of retail sales.
The emerging entity will have a combined annual prescription base of 23.5 million (IMS medical audit Dec 98 to Nov 99). Glaxo, along with its affiliate companies Burroughs Wellcome and Biddle Sawyer have a prescription base of 19 million, while SmithKline products generate 4.5 million prescriptions per year.
The two companies complement each other very well in terms of therapeutic classes. Glaxo is the market leader in therapeutic categories such as cephalosporins, plain corticosteroids, anti-ulcerants and topical corticosteroids. SmithKline is the market leader in pure vaccines and has a sizeable presence in broad spectrum penicillins, anti-infective antidiarrhoeals and iron preparations.
The commonality between the two is their vitamin B complex brands. Vitamin B complex brands contributed Rs 56.27 crore to Glaxo's sales between October 98 and November 99, compared to SmithKline's Rs 20.21 crore.
Click here for Glaxo's top five therapeutic classes and brands
Click here for SmithKline's top five therapeutic classes and brands
Problems to be overcome
The amalgamation of the two entities is likely to pose some problems for Glaxo, which is in the midst of a major restructuring excercise. Glaxo has split the product portfolio of Glaxo, Burroughs Wellcome and Biddle Sawyer into seven business units, based on therapeutic categories.
"The existing imbroglio between the Burroughs Wellcome union and the Glaxo management is yet to be resolved before Burroughs Wellcome can be integrated with Glaxo. This may cause some delays," says Devinder Pal, chief executive of Mumbai-based Catalyst Pharma consulting. Glaxo spokesperson declined to comment on the merger, but a company source says that a board meeting was held today for preliminary discussions.
Another important aspect of the merger is SmithKline Beecham's 100 per cent subsidiary in India – SmithKline Beecham Asia. While SmithKline Pharma has already announced its intentions to launch research products through this subsidiary, Glaxo products too may use this subsidiary to launch certain new products, analysts feel. Glaxo is also not averse to setting up another 100 per cent arm in India. Its chairman Sir Richard Sykes has already conveyed this during his recent visit to the subcontinent.
SmithKline Beecham Asia has already launched Hibrix, a vaccine for meningitis, and may launch SmithKline Beecham's latest anti-diabetic drug Avandia. As per the arrangement, SKB Pharma receives a promotion fee from SKB Asia for marketing Hibrix.