Glaxo moves to boost sales over counter

GLAXO, the pharmaceuticals giant, yesterday signalled its intention to exploit the consumer medicine market with a series of board changes designed to develop expertise in the over-the-counter drugs market.

The City was concerned that the change in strategy meant Glaxo was poised to make an acquisition. Its shares fell 13p to 682p - one of the few shares to lose ground yesterday. Although the group has more than pounds 1.5bn cash, there has been speculation that it will launch a pounds 3.5bn rights issue to buy Warner Lambert, the US drugs group whose products include Listerine mouthwash and Benylin cough medicine. That has helped push its shares down almost 20 per cent in the past three months.

Sir Paul Girolami, Glaxo's chairman, did little to dispel such speculation yesterday, saying that 'all possible methods' of developing an over-the-counter strategy would be reviewed.

Arthur Pappas, who is currently responsible for Glaxo in Asia-Pacific and Latin America, is to take charge of the group's OTC strategy from 1 March. He previously worked at Merrell Dow, which has significant OTC interests. His position in Asia-Pacific will be taken by Neil Maidmant.

Zantac, the ulcer drug, is likely to be the first product that Glaxo will sell over the counter, although probably only for less serious conditions such as heartburn or indigestion. SmithKline Beecham plans to transfer its ulcer drug Tagamet to the OTC market when its US patent expires next year.

Switches from prescription to the OTC market are becoming increasingly common, spurred both by companies' desire to extend the market for their products and governments' determination to reduce drugs bills. For some products, the switch has dramatically increased revenue.

James Dudley, a consultant specialising in this area, points to Nicorette, used to help stop smoking, which was launched OTC in 1991. Since then, its sales have risen from about pounds 5m to pounds 15m.

Paul Woodhouse, drugs analyst with Smith New Court, believes Glaxo is more likely to consider joint ventures than an acquisition of an OTC company. A number of such deals have recently been agreed by Glaxo's rivals including SmithKline Beecham, which is co- marketing OTC products with Marion Merrell Dow in the US, and Merck, which has an agreement with Johnson and Johnson.

Among the potential partners for Glaxo is Roche, which co-markets Zantac in the US.