British pharmaceutical heavyweights Glaxo Wellcome
PLC and SmithKline Beecham PLC have reached agreement to merge,
forming the world's largest drugmaker, The Financial Times reported
in its Monday editions.
The agreement, to be announced later Monday, creates a new
industry giant, to be called Glaxo SmithKline, with a market
capitalization of $184 billion, the newspaper said.
The planned merger still must be approved by the Federal Trade
Commission and the European Union.
A spokeswoman for SmithKline refused to confirm the newspaper
report. No one from Glaxo returned phone calls Sunday night.
The new group would be headquartered in London, but largely run
from a new operational base in the United States, possibly New
Jersey, the London-based newspaper said. The group would have a 7.5
percent share of the global pharmaceutical market.
The planned merger demonstrates the pressure facing even the
biggest names in the pharmaceutical industry to consolidate with
rivals as a way to afford the rising costs of developing and
selling new medicines. It is also likely to trigger a new round of
takeovers and mergers throughout the industry.
Only last week, Pfizer Inc. emerged as the likely winner in the
battle for U.S. drugmaker Warner-Lambert Co.
Bowing to pressure from its investors, Warner-Lambert management
said they would negotiate a buyout from Pfizer, backing away from a
previously announced merger deal with American Home Products Corp.
If that deal goes forward, the combined group would have 6.5
percent of the global market.
Talks between Glaxo and SmithKline were only disclosed on
Friday. Previous discussions between the two groups collapsed two
years ago over differences between their top executives.
Under the plan, the companies expect cost savings of about $1.76
billion after three years, the Financial Times reported.
The group will have a worldwide work force of 105,000, the
newspaper said. But over three years, about 10 percent of those
jobs will go as the new company makes cuts in middle management and
The merger is expected to take at least six months to complete
and will be realized by an offer of Glaxo or SmithKline shares,
resulting in a 58.75 to 41.25 percent split in Glaxo's favor, the
Financial Times said.
Glaxo's strength lies in its top anti-migraine drug, Imitrex,
and in treatments for asthma and viral infections, including HIV.
SmithKline's top products include the antibiotic Augmentin, the
antidepressant Paxil and a new diabetes drug, Avandia. It also has
a strong vaccines business.
After news emerged that the companies were in merger talks,
analysts said a consolidation would make sense. The two companies
have complementary drug portfolios, and a merger would let them
pool their research and development funds and would give the merged
company a bigger sales and marketing force.
On Friday, after announcing that talks had resumed, both
companies saw their U.S. shares surge on the New York Stock
Exchange. Glaxo rose $2.25 to $60.25, while SmithKline rose $3 to
Worldwide pharmaceutical sales of the combined company would
total $17.8 billion, based on 1998 annual figures. That would
surpass the $15.9 billion in sales of a combined