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GlaxoSmithKline (UK/US)

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GlaxoSmithKline is traditionally regarded as one of Europe's leading pharmaceutical developers but like its peers, it has been 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, primarily respiratory and HIV drugs, vaccines and consumer healthcare. Until recently, for example, GSK was among other things the UK's #3 soft drinks marketer. 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 became the global leader in OTC medicines ahead of Johnson & Johnson. It will get bigger still with a deal to absorb Pfizer's consumer healthcare business as well by the end of 2019.


Who handles GSK's advertising? Click here for agency account assignments from adbrands.net. Including unmeasured media, GSK declared total advertising expenses of £1.27bn in 2016. In the US, Kantar (in Advertising Age) reported measured expenditure of $685m for 2016, out of an estimated total of $993m. Biggest spending brands were Breo Ellipta (measured media spend of $154m), Flonase ($118m), Sensodyne ($100m), Excedrin ($28m) and Theraflu ($27m).


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Brands & Activities

Headquartered in the UK, but with its drug development operations based in the US, GlaxoSmithKline also has manufacturing sites in another 35 countries, and supplies its products to more than 160 markets. There are three main arms to the business: prescription pharmaceuticals, vaccines and consumer healthcare. In 2014, the group agreed a major three-part deal with Swiss rival Novartis to better focus its pharmaceutical portfolio, while also boosting its consumer healthcare business and expanding the vaccines division.


GSK's biggest sector is prescription medicines, but sales have slipped back from their one-time highs as a result of divestments and patent expiry. Total revenues for 2018 were £17.3bn, more or less unchanged year on year. GSK's long-time top-selling product is the asthma drug known as Advair in the US, Seretide in the UK and Viani in Germany. However, its US patent expired in 2012, and as a result sales have steadily declined from a high of £5.27bn in 2013. Advair/Seretide is in fact a combination of two other asthma drugs manufactured by GSK: Flixotide/Flovent (which reported standalone sales of £637m in 2015) and Serevent (under £100m). GSK's longest established asthma product is Ventolin. Sales were boosted in the late 2000s and early 2010s by strong performance in the US, with the result that the drug has climbed back into the group's top four pharmaceuticals. Another asthma drug Flonase/Flixonase lost its US patent at the beginning of 2006 leading to a sharp drop in sales. Veramyst is another allergy spray product introduced in 2007. Flonase and Veramyst both switched to OTC sales in the US in 2016, the latter under the name Sensimist.

In 2014, the group launched two brand new respiratory and asthma medicines Breo Ellipta and Anoro Ellipta, both developed in partnership with Theravance. Also known in some markets as Relvar, sales of Breo Ellipta more than doubled in both 2015 and 2016 to £620m. The Ellipta brand refers to an unusual type of inhaler that can be used for several of GSK's respiratory products. Combined sales from all Ellipta products were £950m. The latest addition to the respiratory portfolio is 2016 launch Nucala, an injectable biologic treatment for asthma. The group also has prescription rights in Japan to Zyrtec, the allergy medicine originally developed by Pfizer. Combined sales from these and other respiratory products were £6.51bn, or 40% of the group's total pharma revenue.

In 2017, the group received FDA approval for a new Ellipta-delivered COPD product, Trelegy, which combines three separate medications in one, a so-called "closed triple" dosage. Sales are expected to top $1bn by 2020.

In 2009, in a rare case of cooperation between GSK and arch-rival Pfizer, those two companies agreed to pool their respective AIDS/HIV treatments in a joint venture, ViiV Healthcare, initially 85% controlled by GSK. Three years later, Japanese developer Shionogi also contributed its products. As a result, GSK now holds 78% of equity, with Pfizer on 12% and Shionogi at 10%. Both smaller companies have options to force an IPO of the business or have their shares acquired by GSK. The group manages a portfolio of AIDS/HIV treatments now led by recent launches Triumeq, sales of which more than doubled in both 2015 and 2016 to £1.74bn, and Tivicay (£953m). They are supported by the older Epzicom/Kivexa (sales down again in 2016 to £568m). The rest of the portfolio has witnessed significant decline since 2009 as a result of patent expiry and generic competition. Former market leader Combivir now has sales under £25m. Like Advair, this is a combination of two other products, in this case GSK's own Retrovir and Epivir. That was a key factor in prompting the partnership with Pfizer, which contributed new products Selzentry and Viracept. In 2016, ViiV also acquired the HIV pipeline of rival manufacturer Bristol-Myers Squibb for an initial upfront payment of $317m and future royalties depending on performance. BMS continues to market its own established HIV drugs, such as Sustiva and Reyataz but won't launch any new ones into this sector. Combined sales from the whole ViiV portfolio in 2016 were £3.56bn, or 20% of total pharma sales.

Other anti-virals within GSK's portfolio include Valtrex for genital herpes and Zeffix for hepatitis. Both patents expired in 2010, so sales are now comparatively small at under £120m respectively. During 2009, the group agreed to pay up to $3.6bn to acquire Stiefel Laboratories, which makes various specialist dermatological products including Duac for acne, Olux-E for dermatitis and Soriatane for psoriasis. That business contributed full-year sales of £393bn in 2016. A new acne wash treatment, MaxClarity, was launched in 2010 with a big push, but subsequently withdrawn temporarily from the market because of problems with its dispensing system.

Other ongoing products include Avodart for enlarged prostate (£635m); Benlysta, which was the first new treatment for the autoimmune disease Lupus in more than 50 years, when it was launched in 2010 (sales of £306m in 2016) and Requip for Parkinson's and "Restless Legs Syndrome". The group's collection of oncology drugs, including Tykerb/Tyverb, Votrient and Azerra, as well as pipeline products, was sold in 2015 to Novartis for around $16bn.

Several historically important products have already fallen out of the portfolio as a result of patent expiry. The most significant of these is Zantac, once Glaxo's biggest seller. GSK does still manufacture a prescription version, but it is most widely available as an OTC product, now marketed in the US by Boehringer Ingelheim. Revenues for epilepsy drug Lamictal fell sharply in 2008 after its US patent expired mid-year, but have now begun to rise once more, rebounding to £614m in 2016. The broad spectrum antibiotic Augmentin also lost its patent in 2001, although it continues to notch up significant sales: £563m in 2016, all outside the US and Europe. It was followed in 2003 by patents on some versions of the antidepressant Seroxat/Paxil. Antidepressant Wellbutrin lost its patent at the end of 2006, as did cancer treatment Zofran. Heart disease treatment Coreg lost its US patent in 2007, causing sales to more than halve that year alone. All of these contribute sales of under £150m each.

Not all launches go as smoothly as expected. A new diabetes treatment, Redona, was cancelled in 2006 because of disappointing test results, as was a new HIV/AIDS compound. The group had also had high hopes for erectile dysfunction treatment Levitra, a rival to Pfizer's Viagra, introduced in 2003. Developed by Bayer and co-marketed worldwide by GSK, it seemed to enjoy an immediately successful launch, substantially reducing Viagra's dominance over this sector. However sales failed to take off in 2004, and at the start of 2005, GSK sold worldwide marketing rights outside the US back to Bayer. GSK's North American sales were approximately $139m in 2010, out of Levitra's total of around $708m.

The most serious blow to GSK's portfolio since 2007 has been regulatory concern over side-effects associated with diabetes drug Avandia and associated products Avandamet and Avandaryl. Avandia contributed sales of £1.6m in 2006, but its future came under threat the following year from evidence which suggested a higher risk of heart attacks in some patients when compared to other products. The company was ordered to add a "black box" warning to packaging of Avandia in the US, causing a sharp decline in local sales, partly offset by increases in other markets. However, similar restrictions were imposed in Europe in early 2008, causing total sales to plunge by 40% that year, and by a further 16% in 2009. In 2010, Avandia narrowly escaped a total ban from the US market following investigation by an FDA panel. In the UK, however, it was at the centre of several damaging media reports, including an editorial in the British Medical Journal which said it should never have been licensed. Its total withdrawal was ordered by European regulators in September that year, causing sales to plummet to just £123m for 2011. The group set aside $6bn to settle lawsuits brought by patients claiming a deterioration in their health from taking the drug. After several other mis-starts, the group finally launched another new diabetes treatment in 2014 under the name Tanzeum/Eperzan, but sales are still modest at under £150m.

The group has also been under investigation by regulators on several occasions, especially in the US, for "off-label" promotions of its products, where the sales team encouraged the use of products to treat ailments for which they were not officially recommended. Such practices landed GSK with a record $3bn fine in 2012. Among the other challenges facing the group in 2010 were manufacturing problems at a plant in Puerto Rico that caused contamination and incorrect dosing of several medicines. In summer 2013, the group's operations in China came under intense scrutiny after local managers were accused of running a $290m campaign to bribe local hospital officials and doctors. Country chief Mark Reilly, who faces time in prison over those allegations, was also embarrassed by the release of a secret sex tape. GSK suspended Reilly pending a full local investigation though it is far from clear whether he was directly involved in the bribery scandal. The group also initiated separate corruption investigations in 2013 and 2014 in as many as 10 other countries including Poland and multiple markets in the Middle East.

In 2008, GSK agreed to acquire US biotech developer Sirtris Pharmaceuticals, which is working on enzyme-based products designed to slow the ageing process. In 2012, it launched a bid to acquire Human Genome Sciences, the developer with whom it partnered on Benlysta and other drugs, for $2.6bn. That initial offer was declined, prompting GSK to address its offer directly to the smaller company's shareholders. It eventually secured a deal with an increased offer of $3bn.


One of the group's strongest performing areas in recent years has been vaccines, which operates separately from the main pharma business. GlaxoSmithKline Worldwide Vaccines is one of the world leaders in its sector, with combined sales of £5.9bn in 2018. Under the 2014 deal with Novartis, GSK acquired the Swiss company's vaccine portfolio (excluding flu products) for up to $7.1bn, depending on future performance. That makes it the global leader overall, ahead of Sanofi and Merck, with more than 40 products.

GSK's most important products currently are best-selling pediatric vaccine Infanrix/Pediarix, which contributed £769m in 2016, and hepatitis vaccines Havrix and Engerix-B, with combined sales of £602m. Other products include influenza vaccine Fluarix, Rotarix for rotavirus and Boostrix for diphtheria, tetanus and whooping cough. In 2005 the company agreed to pay $1.4bn for Canadian company ID Biomedical, which makes flu and other vaccines, including new seasonal flu vaccine Fluviral. It launched cervical cancer vaccine Cervarix in Europe in 2007. Synflorix, a vaccine against pneumococcal disease in infants, was approved in Europe in 2008. Other new additions include Bexsero and Menveo to combat meningitis (combined sales of £592m), and new shingles vaccine Shingrix.

Consumer Healthcare

The group now manages an even more substantial Consumer Healthcare portfolio comprising over-the-counter (OTC) medicines and oral care products, all of which are among the market leaders in the UK, as well as in other markets. Under the 2014 deal with Novartis, GSK's consumer healthcare division absorbed the Swiss group's equivalent portfolio, which includes brands such as Excedrin, Voltaren and Otrivine. Novartis retained a 36.5% shareholding in the merged business, which operates under the GSK name, and overtook Johnson & Johnson as the #1 global consumer healthcare company. Reported sales for 2018 were £7.7bn.

Following the Novartis deal, GSK held an option to acquire the Swiss company's outstanding shares at some point during 2018. At the beginning of that year, it began exploring a bid to acquire Pfizer's rival OTC division. However, it eventually withdrew that bid in March and instead agreed to buy out Novartis for another $13bn (or £9.2bn). Talks with Pfizer restarted at some point during the year, and a deal was eventually agreed to absorb the US company's OTC division into a newly created JV in 2019.

Oral care products generated sales of £2.50bn in 2018. GSK is the global #3 (behind Colgate and P&G), with 12.7% global share in mid-2017 (Worldview 360 report quoted by Colgate). It is #2 in most developed markets, with the exception of North America, where it ranks a low #3 behind Colgate and P&G, and Germany, where it holds the #1 spot. In its domestic market of the UK it is #2 behind Colgate with over 31%. The portfolio of brands is led by Sensodyne and Aquafresh. Helped by the benefits of the weak UK pound, global sales of Sensodyne topped £1bn for the first time in 2016, making it GSK's biggest ever consumer healthcare brand. Aquafresh added around £650m.

The group's original oral care brand was Macleans, introduced in the UK in 1927 as a peroxide tooth paste by New Zealand-born entrepreneur Alex Maclean, and acquired by Beecham Laboratories a decade later. P&G revolutionised the market in the 1950s with the introduction of fluoride-based toothpaste, to battle tooth decaay. However, Beecham was prevented by P&G's patent from adding that miracle ingredient to Macleans until 1967. At the same time it began working on a new paste that would tackle more effectively what were now the three perceived requirements of modern oral care: prevention of tooth decay and fresh breath as well as cosmetic cleansing. Aquafresh, launched in the early 1970s, came out of the tube in three distinct stripes. In its marketing, Aquafresh claimed that one stripe contained fluoride to guard against tooth decay, another was designed to fight plaque, and the third freshened breath. It gradually overtook stablemate Macleans in the UK, and achieved a high level of success in the US. In 1974, Beecham also acquired German healthcare manufacturer Lingner, with local brands including Odol toothpaste, well-established as one of the country's most trusted brands. A new version of Odol was launched with the same formulation (and stripes) as Aquafresh under the name Odol-Med3 (Odol-Dent 3 in Switzerland). Aquafresh has also been successfully extended into other oral care segments beyond toothpaste, primarily manual toothbrushes and whitening products.

However it has gradually been overtaken as GSK's lead oral care brand by Sensodyne, originally a more specialised and premium-priced product for sensitive teeth and gums, but repositioned as a general market toothpaste by the company since it was acquired in 2000 from US company Block Drug. It also has a wider footprint than Aquafresh, with distribution in more than 120 countries. (In Japan it is known as Shumitect). Like AquaFresh it comes in a range of formulations, including spin-off ProNamel, an even more specialised product designed to strengthen tooth enamel. Sales of Sensodyne topped £1bn for the first time in 2016, accounting for almost half the group's total oral health sales.

Aquafresh is marketed in Spain as Binaca, and in Italy as Iodosan. The group also markets Corsodyl mouthwash in Europe; Dr Best toothbrushes in German-speaking markets; Astringosol mouthwash in Mexico and selected Asian markets; and has a substantial range of products for denture wearers such as denture adhesive Poli-Grip, and cleansers Corega and Polident. In 2008, the group acquired Biotene, an OTC treatment for dry mouth syndrome. Paradontax is a specialist toothpaste to treat bleeding gums. The group currently doesn't market oral care products in China, other than in Hong Kong and one or two other local areas; and Aquafresh was withdrawn from the Indian market at the end of 2004 as a result of poor performance.

For the year to Sept 2016, IRi (in The Grocer) ranked Sensodyne as the local #2 toothpaste with sales of £88m and Aquafresh #4 with £27m. (Colgate and Oral-B were #1 with £2001 and #3 with £52m). In mouthwash, GSK's Corsodyl was the overall #2 (behind Johnson & Johnson's Listerine). In the US, Sensodyne was the #2 best-selling toothpaste.

Its collection of OTC products also includes a powerful collection of smoking cessation products including Nicorette gum and related products in the US. This was originally developed by Pharmacia, but GSK holds US rights under license, now from Johnson & Johnson which retains rights in other countries including the UK. In other territories - such as the UK - GSK markets its own smoking cessation products in competition with Nicorette, under different names including NiQuitin CQ, NicoDerm patches and Nicabate. Combined sales from the nicotine replacement products are around £350m.

Panadol leads a portfolio of analgesics including Hedex, Resolve and Swedish brand Alvedon. Panadol alone accounts for sales of almost £400m. Tums (sales of £100m-plus) heads a group of gastro-intestinal products such as Andrews Antacid and Salts, Citrucel, and Eno Fruit Salts. Other products include respiratory tract products such as the Beechams Cold and Flu range (marketed as TheraFlu in the US), as well as Coldrex, Contac, Day Nurse, N'Ice and Night Nurse; and a wide range of vitamins including Geritol. The group acquired US manufacturer CNS at the end of 2006, whose products include Breathe Right nasal strips. The respiratory portfolio was boosted in the US in 2016 by the addition to OTC versions of former prescription-only drugs Flonase and Veramyst. In 2007, the group launched the first ever FDA-approved OTC weight loss drug, Alli, a lower-strength version of Roche's Xenical prescription product. GSK acquired world rights except in Japan. Sales started strongly but tailed off as a result of widespread reports of potentially embarrassing side-effects (such as sudden diarrhea). A group of 19 smaller or non-core OTC brands were put up for sale, including Abtei, Beconase, Ecotrin, FiberChoice, Lactacyd, Nytol, Phillips Milk of Magnesia, Solpadeine, Tagamet and non-prescription Zantac. North American rights to several of these brands were sold at the end of 2011 to Prestige Brands for $660m. The brands were sold in the UK to Omega Pharma for £391m, and in all other markets to South Africa-based Aspen Pharma, for £164m.

Brands added to the portfolio from the merger with Novartis OTC include non-prescription versions of the group's leading pharmaceuticals (such as fungal treatment Lamisil AT), as well as Prevacid24 antacid (under OTC license from prescription developer Takeda); Triaminic, Tixylix, Theraflu and Otrivin/Otrivine cough and cold remedies; Voltaren muscle relaxant; Nicotinell / Habitrol smoking-cessation products; Savlon first aid products; Ex-Lax laxative (also marketed as Benefiber); Transderm motion sickness patches; and the Aller-Eze allergy remedy range. It also includes a portfolio of OTC products acquired by Novartis from Bristol-Myers Squibb, such as analgesic Excedrin, antacid Bufferin, advanced moisturizer Keri, cold remedy Comtrex and yeast infection treatment Vagistat.

GlaxoSmithKline was until recently the UK's #3 manufacturer of soft drinks, with brands including Lucozade and Ribena. A deal was agreed in Sept 2013 to transfer the two brands to Suntory of Japan for £1.35bn. GSK acquired protein-based sports drink Maximuscle for £162m in 2010. Though it had become only a niche product now in the UK, malt-based hot drink Horlicks has a huge following in Asia, especially in India. Combined sales from the nutrition portfolio, led by Horlicks, were £643m in 2018. GSK announced in Spring 2018 that it was considering the sale of Horlicks. A deal was eventually agreed with Unilever for €4.6bn


For 2015, group revenues rose 4% on a comparable basis to £23.92bn. Attributable net profits more than tripled to £8.37bn, as a result of a £9.2bn gain on the sale of the oncology portfolio to Novartis. For 2016, the addition of Novartis OTC products and the weak pound prompted in a 17% rise in revenues in 2016 to £27.89bn. At constant rates, the increase would have been more like 6%. However, attributable net income plunged by 87% to £1.06bn, partly as a result of provisions for the forced buyout of Novartis, Pfizer and Shionogi from OTC and Viiv. Revenues for 2017 were £30.19bn, while net profits more than doubled to £2.17bn.

For 2018, revenues edged up by another 2% to £30.82bn. Falling costs resulted in an impressive 36% jump in pretax profits, while lower tax charges prompted an 87% jump in net income to £4.05bn. The US accounted for 39% of group revenues, and Europe as a whole for 26%. Net debt remains high at £13.2bn.


GSK CEO Sir Andrew Witty was under intense pressure from investors from 2015 to step down. He finally conceded in March 2016, confirming a plan to leave in 2017. He finally departed in March that year, to be succeeded by Emma Walmsley, previously CEO of GSK Consumer Healthcare. She is the first woman to lead a Big Pharma business. (In a surprising development, Witty was subsequently appointed as CEO of UnitedHealth Group's pharmacy benefits division Optum, which negotiates drug prices on behalf of insurers and employers. Crossing the tracks to the other side of the negotiating table, and to a divisional CEO position rather than the top job, is a wholly unconventional move for a Big Pharma chief. However, Witty has long been an advocate of more affordable drug pricing and his new role will give him an opportunity to expand his influence in that area.) Brian McNamara stepped up to succeed Walmsley as CEO of GSK Consumer Healthcare. The heads of the group's two other main operating divisions departed following Walmsley's appointment.


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

Last full revision 18th May 2017

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