GlaxoSmithKline is one of Europe's biggest pharmaceutical companies. However, like other manufacturers, it is wrestling with the triple threats of generic competition, ever more rigorous regulatory scrutiny, and the challenge of keeping its drug development pipeline filled. GSK's problems have, arguably, been more serious than some of its rivals, resulting in its demotion from the coveted position as global #2 several years ago. It now lags behind even its Swiss rivals by overall revenues. Recently, the group has been tweaking its broadly diversified portfolio in order to specialise on a smaller number of key segments. Until recently, for example, GSK was among other things the UK's #3 soft drinks marketer behind Coca-Cola and Britvic. It agreed to sell this division to Suntory of Japan in order to focus on healthcare. The following year, the group transferred its non-core collection of oncology drugs to Swiss rival Novartis, in exchange for the latter's vaccines business and medium-sized OTC division. As a result, GSK becomes the global leader in OTC medicines ahead of Johnson & Johnson. None of these moves, though, have relieved the increasing pressure from investors, some of whom are calling for a full break-up of the business. See also AquaFresh/Sensodyne profile.
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Adbrands Weekly Update 22nd Sep 2016: GlaxoSmithKline named Emma Walmsley as its next CEO. She will succeed Sir Andrew Witty in March 2017, becoming arguably the most powerful woman in the UK corporate sector. Although five other FTSE 100 companies have female CEOs, GSK is by far the biggest with a market value of £80bn. Walmsley will also be the first woman to run a major pharmaceutical group. She has been at GSK for six years, and currently leads its substantial consumer healthcare division. She previously spent 17 years at L'Oreal, latterly as head of its China consumer products division.
Adbrands Weekly Update 11th Aug 2016: GlaxoSmithKline is joining forces with tech developer Verily - a unit of Google parent Alphabet Inc - to develop "bioelectronic" medicines to combat diseases such as arthritis, diabetes and asthma. This concept aims to disrupt the pathways of these medical conditions using electronic signals emitted by tiny devices implanted in the patient's body. The new joint venture is named Galvani Bioelectronics, 55% owned by GSK, and 45% by Verily. The latter already has a similar partnership with Sanofi to fight diabetes, and is finalising one with Johnson & Johnson to develop miniaturised surgical robots.
Adbrands Weekly Update 21st Jul 2016: GlaxoSmithKline concluded a review of marketing for its consumer healthcare division, consolidating duties with nine of its main current partners and eliminating other agencies from the roster. Grey and Saatchi & Saatchi will continue to be the company's two lead advertising agencies; Havas Worldwide will retain some advertising business and will also add digital duties. Weber Shandwick will handle some advertising (including lead for the Excedrin brand) as well as PR and digital, alongside Edelman. Professional marketing is split between McCann Health and Ogilvy Commonhealth. Geometry has global shopper marketing, while WPP Digital will contribute additional digital expertise. Media remains split between PHD and various GroupM networks. Grey now holds the five of GSK's seven lead brands, adding the Otrivin account from Saatchi, which retains the remaining two. The biggest loser in the consolidation appears to be TBWA, which had previously handled the global Aquafresh toothpaste brand as well as all smoking cessation products. The new agency for those accounts has not been disclosed. PR agency Golin also seems to have left the roster, along with DDB and CHI & Partners.
Adbrands Weekly Update 24th Mar 2016: Surrendering to months if not years of pressure from investors, GlaxoSmithKline CEO Andrew Witty confirmed plans to step down in a year's time. Though insiders such as CFO Simon Dingemans will be considered for the job, an outsider candidate is more likely. "I believe this will be the right time for a new leader to take over," Witty said in a statement about his departure. "In making this decision it has been important to me that the board has the time to conduct a full and proper process."
Adbrands Weekly Update 10th Mar 2016: Direct to consumer ad expenditure for US prescription pharmaceuticals came close to record levels in 2015, according to estimates from Nielsen, reported by industry blog DTC Perspectives. Total spend reached $5.17bn last year, capping three years of gains since 2012's low of $3.4bn. The latest figure is close to eclipsing the record $5.4bn spent in 2006. A key factor is the increase in drugs with high selling prices, such as Gilead's Harvoni, a course of which costs as much as $100,000 a year. At that level, it doesn't take an excessive number of users to get a return on investment in marketing if its successfully builds demand. That in turn has prompted a backlash from physicians and insurers, who believe that marketing costs contributes to high pricing of many new launches. Harvoni was itself the year's 5th most advertised drug, behind Valeant's Xifaxan, Sanofi's Toujeo, Merck's Belsomra, and GSK's Breo Ellipta.
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Free for all users | see full profile for current activities: GlaxoSmithKline was formed in 2000 by the merger of two already substantial pharmaceutical groups, Glaxo Wellcome and SmithKline Beecham. The Glaxo side of the business can trace its family tree back as far as 1715, the year Silvanus Bevan opened an apothecary's shop in London. This family business eventually ended up in the hands of William Allen in 1792. A Quaker, he married into the wealthy Hanbury family in 1806. The business changed its name to Allen & Hanbury's in 1810, and expanded its product range to include cod liver oil, malt extracts, throat pastilles and milk-based food for infants.
Meanwhile, the real core of what was to become Glaxo was founded on the other side of the world, when Joseph Nathan established his general trading company in 1873. Nathan was an Englishman who had followed other members of his family out to New Zealand twenty years earlier. The family had already established a successful dairy farm in their new home, and Joseph Nathan set up in Wellington to begin exporting first butter and then skimmed milk back to Britain. Nestle had pioneered the production of powdered milk in 1867, and from 1904 Nathan began to use the same process to make powdered milk which was shipped back under the brand name Defiance Dried Milk. Two years later, the family registered a new name for their powdered milk. They wanted Lacto, but this was already trademarked, so they changed the letters around to form the name Glaxo.
In London, another strand of the business had been constructed by two American pharmacists, Henry Wellcome and Silas Burroughs. Having studied in Philadelphia, they set up their company in England in 1880 to introduce American-style medicines into what was then the comparatively undeveloped British market. Wellcome had worked in the sales division of US drug company McKesson & Robbins, and brought a distinctly American marketing flair to the new company. In 1884 Burroughs Wellcome & Company introduced the Tabloid, a form of compressed pill, that could be adapted to different medicinal compounds. The company's Tabloid chests, effectively medicine cases containing a variety of treatments, were widely publicised.
Rare diseases were a particular interest of Wellcome's, and after the death of Burroughs in 1895, he established several research laboratories to pioneer treatments for yellow fever, diphtheria and other hitherto fatal illnesses. The most significant such institution was The Wellcome Tropical Research Laboratories, founded in 1902. Four years later a US subsidiary was established to market the company's drugs in Wellcome's home country. Finally in 1924, all of Henry Wellcome's various business and research activities were grouped under the parent company The Wellcome Foundation. When Sir Henry Wellcome died in 1936, he left sole ownership of his now substantial business to the Wellcome Trust, a medical research charity.
By the mid-1920s Allen & Hanburys and Joseph Nathan & Co had also grown and developed. In 1923, both companies were separately granted licences to produce insulin for the treatment of diabetes. Also that year Joseph Nathan, now controlled by the founder's sons, obtained rights to a process of extracting vitamin D from fish-liver oil. The company's first pharmaceutical product, Ostelin Liquid, was introduced a year later. A string of new products were developed over the years that followed, and Glaxo Laboratories was established in 1935 as the main research and pharmaceutical arm of Joseph Nathan. During World War II, the company became the UK's leading manufacturer of penicillin.
In 1945, the last of Joseph Nathan's sons retired from the business. In 1947, Glaxo Laboratories effectively absorbed Joseph Nathan & Company, and went public as Glaxo Group. The company pioneered a number of important new treatments in the years that followed, including the isolation of vitamin B-12, the introduction of Streptomycin, and later pioneering research into rheumatoid arthritis and dermatological and allergic respiratory conditions. In 1958, Glaxo acquired Allen & Hanbury's. Wellcome also expanded its business, acquiring animal health business Cooper, McDougall & Robertson in 1958, and introducing Actifed antihistamine products. However, Glaxo's reputation was badly dented in the 1960s when a new morning sickness remedy, Thalidomide, caused terrible deformities in developing babies. The drug was quickly withdrawn. Less controversial were treatments such as Betnovate for steroid skin diseases and Ventolin for asthma.
In 1972, Glaxo Group was targeted by rival Beecham Laboratories, which mounted a hostile takeover bid. Glaxo defended itself by announcing it would merge instead with medical retailer and developer Boots. But in the end both deals were vetoed by the UK government on competition grounds. Instead Glaxo set out to expand its virtually non-existent US business, acquiring local research group Meyer Laboratories in 1978. In 1981, the company introduced Zantac, an anti-ulcerant which went on to become the world's top-selling medicine by the end of the decade, generating over a third the company's turnover for several years. Meanwhile Wellcome introduced the herpes and cold sore treatment Zovirax.
Increasingly Glaxo and Wellcome found themselves joint rivals to the fast developing Beecham Group. In 1989, Beecham merged with US giant SmithKline Beckman to form SmithKline Beecham, overtaking both Glaxo and Wellcome. The deal initiated a wave of consolidation within the industry. Glaxo and Wellcome responded in 1995, merging as Glaxo Wellcome. In 1998, SmithKline Beecham threatened to take a step ahead by merging with American Home Products. Instead Glaxo Wellcome stepped in with a better offer, and later that year the two Anglo-US rivals declared that they would merge.
However it was not to be. Not yet, anyway. Within weeks, that deal was off after disagreements between the respective boards of Glaxo Wellcome and SmithKline Beecham over who would be the directors of the new group. These difficult negotiations culminated in friction between SB's high profile CEO, the former Danish tennis star Jan Lechsly, and his opposite number at Glaxo, Sir Richard Sykes. Institutional investors were irate over the collapse in talks and began pressuring the two companies to return to the table. It took almost two years for further negotiations to reopen, triggered by Lechsly's announcement that he would retire in 2000. With press speculation growing ever more frenzied, Glaxo and SB finally confirmed they were back in talks in January 2000, and only days later confirmed they would merge to create the world's largest pharmaceutical company by market share.
Yet the sheer size and complexity of the combined business resulted in numerous regulatory issues, especially in the US. The merger was referred to competition and regulatory authorities who finally approved the deal in late 2000, subject to the sale of a number of drugs. GlaxoSmithKline finally began trading in December of that year. Sykes and Lechsly both stepped down from the CEO role in favour of the group's scientific chief, JP Garnier. Also in 2000 the group acquired US oral care company Block Drug, for $1.24bn. The purchase greatly increased the strength of its oral care portfolio, with brands including Sensodyne and Poli-Grip.
In response to pressure from third-world governments and charities, GSK finally agreed in 2001 to supply several of its HIV/AIDS drugs at cost to developing nations, including South Africa. Several HIV drugs were already being produced by local generic manufacturers in infringement of GSK's patents; the drug company finally agreed to abandon attempts to fight the case legally. The group also put a huge marketing spend behind the launch of new asthma drug Advair/Seretide, which combined its existing treatments Serevent and Flovent in one substance.
In 2003, GSK became the most high profile target to-date of increasing shareholder activism, when the group's stockholders voted down a board-approved remuneration plan which awarded lavish benefits to CEO JP Garnier, irrespective of the company's performance. In another blow, the group was hit at the start of 2004 with a huge $5.2bn tax bill from the IRS, which claimed the company had used internal pricing procedures to avoid paying full taxes in the US between 1989 and 1996. GSK had anticipated some form of charge and had already made a reserve of around $2.5bn to cover it; the actual demand from the IRS is for $2.7bn, with a further $2.5bn in interest. GSK appealed against the bill. The IRS raised the sum it was seeking to $7.8bn in early 2005 to cover tax on profits of sales of Zantac between 1997 and 2000 which it claims should have been paid in the US. GSK eventually agreed a deal to settle the dispute in 2006 with a payment of $3.4bn.
There was more trouble with the US government in May 2004 when the New York Attorney General brought a $1.9bn lawsuit against GSK for allegedly suppressing evidence linking its antidepressant Paxil with suicidal behaviour in teenagers. Drug regulators later ordered the company to withdraw advertising for the product, and GSK eventually settled out of court with the Attorney General's office for $2.5bn, while also denying the allegations. Andrew Witty replaced JP Garnier as CEO of GlaxoSmithKline in May 2008. See full profile for current activities
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