Glaxo and SmithKline agree to merge

In a merger of equals valued at $75 billion, London-based Glaxo Wellcome Inc., and SmithKline Beecham, also based in London, have agreed to join businesses – forming the largest pharmaceutical company in the world. The new company, which would be known as Glaxo SmithKline, would have an annual research and development budget of approximately $4 billion.

"With this merger, we are bringing together two world-class organizations with complementary technologies and scientific knowledge," said Sir Richard Sykes, Chairman of Glaxo Wellcome. "The new organization, led by one of the sector's most talented and experienced management teams, will be at the forefront of an industry which will continue to undergo rapid and scientific change."

According to a statement, the two companies decided to merge because they believe rapid technology will transform the industry to the point that "significant scale and resources will be required in order to sustain investment in the skills, technology and expertise necessary to discover, develop and deliver new and better medicines to patients in a faster and more efficient way."

Jean-Pierre Garnier, chief executive officer-elect of Glaxo SmithKline said, "I am confident that, by combining R&D excellence with marketing strength and financial power, Glaxo SmithKline will lead the industry into the future. This will give us a major advantage to succeed in the fast-changing healthcare environment."

The initial board of Glaxo SmithKline will consist of 14 directors drawn equally from the boards of Glaxo Wellcome and SmithKline Beecham.

Corporate headquarters will be located in London and operational headquarters will be established in a new location in the United States. Currently, the company estimates that, in most countries, the merged group's operations will be consolidated. However, it is anticipated that in the United States, SmithKline Beecham's pharmaceutical business based in Philadelphia, its consumer healthcare business based in Pittsburgh and Glaxo Wellcome's business based in Research Triangle Park will all retain their current locations.

Though the company does expect some job losses, a statement from the company said, "The process will take place over a period of years, and wherever possible, efforts will be made to reduce the impact of job losses by, for instance, introducing early retirement schemes."

A strong future

New York-based industry analyst Datamonitor predicts that the merger will provide strong benefits for both companies.

"Although the growth which SmithKline Beecham's ethical pharmaceuticals division will experience is likely to be tempered by Glaxo Wellcome's weaker growth, the combined company will have stronger sales growth than Glaxo Wellcome alone, and, therefore, the merger will be of substantial benefit to Glaxo Wellcome," read a Datamonitor release.

"The key benefit of the merger for SmithKline Beecham is that the combined company's increased pharmaceutical revenues will provide greater funds for pharmaceutical R&D," continued the release, "This will allow SmithKline Beecham to pursue research projects for which it did not previously have the necessary funding. The combined company will have the highest R&D budget in the industry, which should allow the development of innovative products with high future revenue potential."

The merger is expected to be completed by the end of summer 2000. PR