Shannon Bennett
Well-known member
http://business.timesonline.co.uk/tol/business/columnists/article2441895.ece
Garnier’s empire is in need of an overhaul
<!-- END: Module - Main Heading --><!--CMA user Call Diffrenet Variation Of Image --><!-- BEGIN: Module - M24 Article Headline with no image (a) --><!-- getting the section url from article. This has been done so that correct url isgenerated if we are coming from a section or topic --><!-- Print Author name associated with the article --><!-- Print Author name from By Line associated with the article -->James Harding, Business Editor
<!-- END: Module - M24 Article Headline with no image --><!-- Article Copy module --><!-- BEGIN: Module - Main Article --><!-- Check the Article Type and display accordingly--><!-- Print Author image associated with the Author--><!-- Print the body of the article--><!-- Pagination -->It is time to reassess the reputation of Jean-Pierre Garnier.
The chief executive of GlaxoSmithKline, who is set to retire next May, has undoubtedly helped to create one of the world’s biggest pharmaceutical companies. He has also worked hard to find new ways to imbue the company’s research programme with the kind of entrepreneurial spirit usually so lacking at large corporations. And he has been one of the few charismatic showmen of the global healthcare industry, making the public case for greater investment in the treatment of diabetes and cancer and greater government preparedness for potential epidemics such as bird flu.
However, for all his achievements, GSK’s share price has been comatose for years. His company is inundated by problems. Calls for bold action have gone unheeded and the model he has championed – developing drugs from primary research in the laboratory to end use in the hospital – is being questioned.
The scandal over Avandia – the diabetes medicine which in May was linked to a raised risk of heart problems, triggering a slide in sales of the group’s second-best selling product – has concentrated minds.
<!--#include file="m63-article-related-attachements.html"-->After a brief period trading above £15 last year, the shares have sunk back to around £13 – about the same levels it was trading for most of 2003.
Despite much noise about new vaccines to beat cervical cancer and bird flu, the company seems to have relatively little to show for it. GSK points out that when Mr Garnier took over, the business had two drugs in late-stage development. Today it has 33. However, while the group has the asthma drug Advair and plenty of reasonably profitable drugs in the range of £300 million to £1 billion per year, it lacks the sheer numbers of blockbuster products selling in the several billions of pounds that helped to bolster profits at Lipitor and Norvasc-owning Pfizer for much of the past decade.
The group’s structure – a mammoth, vertically integrated organisation employing more than 100,000 people in manufacturing, research, marketing and vaccines, and with a few curious bolt-ons such as Ribena and Lucozade thrown in for good measure – seems increasingly old-fashioned.
Rivals such as AstraZeneca have been forced, out of sheer desperation, to restructure. GSK has been content to chug along with little significant change in either structure or strategy for years.
Investors are now increasingly agitating for a change – a sale of its consumer brands business, or perhaps a more radical attempt to spin off its vaccine business – but it seems unlikely that Dr Garnier’s replacement will want to make a break with the past.
In the meantime, GlaxoSmithKline seems like the perfect candidate for an activist investor seeking to push for change from within.
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Garnier’s empire is in need of an overhaul
<!-- END: Module - Main Heading --><!--CMA user Call Diffrenet Variation Of Image --><!-- BEGIN: Module - M24 Article Headline with no image (a) --><!-- getting the section url from article. This has been done so that correct url isgenerated if we are coming from a section or topic --><!-- Print Author name associated with the article --><!-- Print Author name from By Line associated with the article -->James Harding, Business Editor
<!-- END: Module - M24 Article Headline with no image --><!-- Article Copy module --><!-- BEGIN: Module - Main Article --><!-- Check the Article Type and display accordingly--><!-- Print Author image associated with the Author--><!-- Print the body of the article--><!-- Pagination -->It is time to reassess the reputation of Jean-Pierre Garnier.
The chief executive of GlaxoSmithKline, who is set to retire next May, has undoubtedly helped to create one of the world’s biggest pharmaceutical companies. He has also worked hard to find new ways to imbue the company’s research programme with the kind of entrepreneurial spirit usually so lacking at large corporations. And he has been one of the few charismatic showmen of the global healthcare industry, making the public case for greater investment in the treatment of diabetes and cancer and greater government preparedness for potential epidemics such as bird flu.
However, for all his achievements, GSK’s share price has been comatose for years. His company is inundated by problems. Calls for bold action have gone unheeded and the model he has championed – developing drugs from primary research in the laboratory to end use in the hospital – is being questioned.
The scandal over Avandia – the diabetes medicine which in May was linked to a raised risk of heart problems, triggering a slide in sales of the group’s second-best selling product – has concentrated minds.
<!--#include file="m63-article-related-attachements.html"-->After a brief period trading above £15 last year, the shares have sunk back to around £13 – about the same levels it was trading for most of 2003.
Despite much noise about new vaccines to beat cervical cancer and bird flu, the company seems to have relatively little to show for it. GSK points out that when Mr Garnier took over, the business had two drugs in late-stage development. Today it has 33. However, while the group has the asthma drug Advair and plenty of reasonably profitable drugs in the range of £300 million to £1 billion per year, it lacks the sheer numbers of blockbuster products selling in the several billions of pounds that helped to bolster profits at Lipitor and Norvasc-owning Pfizer for much of the past decade.
The group’s structure – a mammoth, vertically integrated organisation employing more than 100,000 people in manufacturing, research, marketing and vaccines, and with a few curious bolt-ons such as Ribena and Lucozade thrown in for good measure – seems increasingly old-fashioned.
Rivals such as AstraZeneca have been forced, out of sheer desperation, to restructure. GSK has been content to chug along with little significant change in either structure or strategy for years.
Investors are now increasingly agitating for a change – a sale of its consumer brands business, or perhaps a more radical attempt to spin off its vaccine business – but it seems unlikely that Dr Garnier’s replacement will want to make a break with the past.
In the meantime, GlaxoSmithKline seems like the perfect candidate for an activist investor seeking to push for change from within.
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