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Infatuated with gaining scale, Glaxo Wellcome plc and SmithKline Beecham plc combined their pharmaceutical girths in a pounds 108 billion ($160 billion) blockbuster deal in December 2000. The new company wanted to amass world-beating armies of detail men to sell drugs, and have one of the world's largest R&Dbudgets to develop new products.
But while integration efforts reaped some big savings and the combined might of the two produced a potent selling machine, the R&D laboratories have so far failed to fill the gap left by an aging portfolio of drugs - a dangerous trend in a business driven by new products.
Not long ago, London-based Glaxo Wellcome was the R&D envy of the drug industry, rivaled only by Whitehouse Station, N.J.-based Merck & Co. when it came to efficiently developing compounds that would become high-margin blockbuster sellers. Glaxo, which merged with Wellcome in 1995, had come on strong in the '80s, introducing blockbusters such as the anti-ulcer Zantac (taking share from SmithKline's Tagamet) and pioneering the global launch of new products, a strategy that became essential as the cost of developing and marketing pharmaceuticals skyrocketed.
Times have been tougher of late. Even before their deal, both Glaxo and SmithKline were undergoing drug-development droughts. That problem hasn't gone away. The company now admits that it's had problems with its early-stage pipeline.
Not good news, since GlaxoSmithKline plc's patent situation from this point is scary. Its prized antibiotic, Augmentin, which had global sales of pounds 1.4 billion ($2.1 billion) in 2001, faces generic...