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New products, merger to drive Glaxo

Aug 2, 2000

Glaxo seems to be a new high these days. The proposed merger with SmithKline is likely to come through sooner than expected. The company has reported very healthy results for the second quarter with a topline growth of over 27%, when the overall pharmaceutical industry is growing by not more than 10% per annum. Most important, Glaxo’s parent seems willing to introduce new products through the listed company. What however seems to be driving the company’s stock seems to be the sooner–than–expected merger with SmithKline.

The merged company with a market share of 7% will be way ahead of competitors Cipla and Ranbaxy. It will have brands such as Iodex, Augmentin (an amoxycillin–clavulanic acid combination), Engerix (Hepatitis B vaccine), Zevit and Livogen (vitamins and minerals), which will complement its prescription led product profile. Glaxo, at present, has a presence in a large number of therapy areas (over 60% of the market). It is a market leader in 80% of the segments in which the company operates and has a large portfolio of over 200 product packs. Besides, the company enjoys the trust of the medical profession. Its prescription brands such as Betnovate (dermatologicals), Zinetac (ranitidine), Becadexamin (vitamin) Cetzine (anti–histamine) are as well known as over the counter products in their own right. The company has a clean balance sheet and a first class management. Besides, the merged entity will also command an enviable marketing network that will go a long way in its attempt to increase market share.

SmithKline Consumer has a presence in health food drinks through the brands ‘Horlicks’, ‘Viva’ and ‘Maltova’. Glaxo, on the other hand, has sold its brand ‘Farex’ which operated in a similar space a few year’s back. Since the parent’s operations are likely to be restricted to pharmaceuticals it is quite possible that the merged company in India could disinvest the healthfood operations. Another side effect of the impending merger is that Glaxo is likely to inherit SmithKline’s 100% subsidiary in India i.e. SmithKline Beecham Asia. Whether ‘Crocin’ ‘Tums’ and ‘Eno’ continue to remain a part of the parent’s 100% subsidiary will demonstrate the parent’s attitude towards the minority shareholders.

As far as new products are concerned the company has lined up a slew of new launches over the next 12–18 months. Overall the company would continue to focus on the therapy areas of the future such as respiratory, anti–virals, osteoporosis and consolidate in dermatologicals, gastrointestinals and antibiotics.

Glaxo's new products
Brand Purpose Introduced
Hepitec Hepatitis–B Yes
Seretide Asthma Yes
Lamictal Epilepsy No
Valtrex Viral Infections No
Epivir AIDS Yes
Combivir AIDS Yes
Zoderm Oxiconazole No
Histofreezer Wart removal Yes

Glaxo has posted a mixed performance over the last two year’s. However, the pending mergers with Burroughs Wellcome and SmithKline Beecham and its recent attempts to restructure its operations have the potential to rev up its performance in the coming year’s.

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