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Merger of Glaxo Wellcome and SmithKline Beecham creates pharmaceutical giant

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Garnier: to head Glaxo SmithKline. Credit: JONNY EGGITT/FT

The merger of the British pharmaceutical companies Glaxo Wellcome and SmithKline Beecham, which comes into effect this summer, creates a giant which could rank number one in the world in terms of spending on research and development (R&D). It will boast a portfolio of 30 new drugs and 19 vaccines in clinical trial.

Glaxo Wellcome is currently the fifth-largest pharmaceutical company in the world in terms of turnover and SmithKline Beecham is ranked twelfth. The new company will have a stock-market value of £110 billion (US$180 billion).

It displaces Aventis from the top position, a company created just a few weeks ago by the merger of Rhône-Poulenc and Hoechst. Meanwhile, the merger between Pfizer and Warner-Lambert, if it materializes, would create the second-largest company in the sector.

Savings made by merging the research sections of Glaxo Wellcome and SmithKline Beecham — estimated at $415 million — will be reinvested in research, say the companies.

The new company plans to invest $4 billion a year in research. Its nearest rival would be Pfizer Warner Lambert, whose component companies spent £2.7 billion in 1998.

Glaxo SmithKline will employ over 15,000 research staff. None of its research departments will be closed and there is no threat of significant redundancies amongst scientists, according to a press release. The companies also promise to maintain their scientific campuses at Research Triangle Park, North Carolina, and Philadelphia.

The merger will combine the power of Glaxo Wellcome's strength in combinatorial chemistry and SmithKline Beecham's strength in genomics and cell and molecular biology. Glaxo Wellcome stands to have its product portfolio rejuvenated through SmithKline Beecham's genomic assets.

The strategies of the companies, stressing genome research, are similar and their therapeutic target areas are complementary: in neurology, for example, Glaxo Wellcome is active in anti-migraine drugs and SmithKline Beecham in anti-depressants.

SmithKline Beecham was the first major pharmaceutical company to invest in genomics, with its 1993 agreement with Human Genome Sciences, the commercial arm of the Institute for Genomics Research, where Craig Venter first made sequencing fashionable. As a result of its genomics activities, SmithKline Beecham now investigates between 150 and 200 new protein targets each year, compared with six to eight before 1993.

Glaxo Wellcome also has functional-genomics programmes and invests heavily in pharmacogenetics, a genomics-based activity that allows patients likely to benefit from a drug, or to suffer adverse side effects, to be identified before therapy is selected.

Given the long lead time for getting any new drug onto the market, analysts say it will be at least five years before it is clear whether the merged company will get a return on its investment in genomics.

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Abbott, A. Merger of Glaxo Wellcome and SmithKline Beecham creates pharmaceutical giant. Nature 403, 232 (2000). https://doi.org/10.1038/35002148

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