GSK

A merger too far?

Presented By:

Rudrakshi
Rupanshi
Sabari
Ritesh
 GlaxoSmithKline: Background
• GlaxoSmithKline often abbreviated to GSK,
• Global pharmaceutical, biologics, vaccines and
consumer healthcare company 
• Headquarter- London, United Kingdom.
• World's third largest pharmaceutical company
measured by revenues after Johnson &
Johnson and Pfizer.
 Continued………

• It has a portfolio of products for major disease areas

including asthma, cancer, virus control, infections, me
ntal health, diabetes and digestive conditions.
•  It also has a large consumer healthcare division
which produces and markets oral healthcare
products, nutritional drinks and over-the-counter
medicines, including Horlicks and Gaviscon.
• Its primary listing is on the London Stock Exchange 
• It has a secondary listing on the New York Stock
Exchange.
 MERGER

Integration of two or more firms on co-equal

basis to form a single larger entity, with the
objective of creating a sustainable
competitive advantage/getting better return
on investment. Shareholders of both
companies retain interest in the merged
entity.
 SmithKline Beckman SmithKline
Beecham
Beecham

Glaxo Wellcome Glaxo

Wellcome

Glaxo SmithKline
GlaxoSmithKline
Wellcome Beecham
 SmithKline Beecham
• SKB – failed in blockbuster drug (Tagamet)
But had an aggressive sales force.
• Beecham- consumer goods Company
successful in early research of antibiotics
• Combination of Benchmarking – Continues
improvement & Process re-engineering.
• New culture
• Improved Reward System
• British Approach was replaced by a process oriented
way of working
• 1994- Growth and Development, share price
rocketed, entry into new geographical markets
• PROBLEM- R&D
GLAXO WELLCOME
 GLAXO

• 1947- Small british firm with origins in

dried milk business, sales in antibiotics,
respiratory drugs and nutritional
supplements.
• 1980- Successful due to R&D efforts.
• 1994- Strong industry position with
3.6% of the world market.
 WELLCOME

• Academic approach to pharmaceutical

• Strong science but weak marketing.
• A laissez-faire style of leadership
 GLAXO WELLCOME

• Glaxo gained presence in therapeutic

areas.
• Wellcome benefitted from greater
financial discipline and focus
• Many were disappointed with the
unimpressive drug pipeline.
MERGERS AND
ACQUISITIONS

?
 ADVANTAGES

• To increase market power

• To overcome entry barriers
• Cost of new product development
• Increased speed to market
• Lower risk than new product development
• Increased diversification
• Reshaping the competitive scope
• For Tax write offs
 Birth of GSK

• In 1998 the merger seemed to be virtually

complete with Glaxo Wellcome (59.5%) and
Smithkline Beecham (40.5%).
• Biggest pharma company and 3rd largest
organization.
• Deal was called off resulting in fall in share
price of both companies.
 Continued…

• Clash between Leschly (SB) and Sykes(GW).

• Contradicting leadership styles of Leschly and
Sykes.
• Fear of take over by both companies.
• Both companies remain unmerged for next
one year.
• Again the attempt to merge started in 1999.
 Continued…

• Jean-Pierre Garnier - CEO of GSK.

• Concerns of FTC (Federal trade commission)
towards GSK.
• Lengthy negotiations with US regulatory
boards.
• Threat of Brain drain at middle manager level.
• Down in the morale of employees.
 New Structure
• Operational HQ in US and corporate HQ in
UK.
• Cost reduction through restructuring and
disposal of assets.
• By 2003 through this denominator
management profit rose up to 35%.
• Profits in turn into R&D. (annual budget of 2.4
bn)
• Glaxos investment in technology + SB’s
leadership in genomics.
 Continued…

• Re-engineering of both R&D and marketing.

• Formation of NCE’s for traditional activities
• Independent 6 sub-units for discovering
drugs.
• Establishing CEDD in 2003 for bio-pharma.
• Formation of marketing partnerships globally
– Eg: With Ranbaxy in India for developing
NCE’s.
 RS Matrix

Smithkline Smithkline
strength weakness
•Strength1 •Strength1
Glaxo’s •Strength2 •Weakness2
strength
•Strength2 •Weakness2
Glaxo’s •Weakness1 •Weakness1
weakness
 Plan to Action

• Skepticism on CEDD, marketing and clinical

trials.
• Product portfolio.
• Few New chemical components for trials.
• Risk diversification.
• Initial shift of focus in re-structuring.
• ‘Research-Day’.
 Continued…

• Garnier’s strategy of transparency.

• Need of distinctive identity.
– Feeling of individual existence.
– Work for common process.
– Dual attitude of managers towards work.
– Gossiping.
• “ Where would we be if we hadn’t merged?
Would we be able to do all the things we do
today? “
Merger, but with Whom?