What ails Glaxo?

After having been one of the UK's most successful companies for more than two decades, Glaxo Wellcome is suddenly facing a series of commercial reversals that has everybody asking, "What ails Glaxo?"

For a company that is on the throes of becoming the world's largest pharmaceutical company on its merger with arch-rival SmithKline Beecham receiving formal approval from regulators, the withdrawal, last week, of its potential billion-dollar drug, Lotronex, from the market on safety grounds was the final straw.

But Glaxo's shares have not yet been impacted. Its ability to discover new products and launch them is continuing unabated. So what went wrong? The company has already recalled three products from the market – Lotronex (a drug for irritable bowel syndrome), Raxar (an antibiotic) and Romozin (a drug for diabetes). Its launch in the market of its latest product, Relenza (a drug for flu) has been lacklustre and well below expectations.

Analysts are beginning to question how a company with a formidable reputation for being hard-nosed and commercially-driven could have slipped up! Glaxo's rise to fame came with its phenomenal success of its anti-ulcerant, Zantac, which was in direct competition with such products like Tagamet of SmithKline. Sheer marketing brilliance ensured that Zantac became the best selling medicines of all times, and gave Glaxo a very healthy revenue growth.

Serious Glaxo-watchers believe that this situation has come about due to the fact that Glaxo has subordinated its commercial and marketing brilliance, which was its core competency, at the altar of innovation. And while it continued to innovate, the lack of marketing brilliance proved detrimental to the company. This change came about with the change in the chairman of the company. Around the time that the Zantac patent ran out, the company appointed Sir Richard Sykes, who was with research and development, as chairman. Sir Sykes had the aim of transforming Glaxo into a scientific innovator.