View from City Road: Sir Richard faces Glaxo's acid test

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The Independent Online
So farewell then, Sir Paul Girolami, the Italian-born accountant who made Glaxo what it is today. In the 1980s Sir Paul was the right man in the right place at the right time. He was lucky, but he was also brave, backing his judgement against prevailing wisdom. Glaxo was transformed from what the City rudely used to call the quoted university into a finely tuned marketing machine which once, albeit briefly, surpassed British Telecom to become Britain's most highly valued company.

Zantac, which was to become the biggest selling prescription pharmaceutical of all time, was not the first ulcer drug of its kind; it was not even the best by more than a narrow margin.

Sir Paul realised it was not so much the product that determined profitability as its marketing. He turned conventional wisdom on its head, sticking a price tag on Zantac way above that of its rival Tagamet, arguing the more people had to pay for it, the more they would believe it was a better product. And then he threw all Glaxo's energies behind promoting it, creating an aggressive sales team and setting unprecedented targets that made the industry gasp.

It worked, turning Glaxo into the second biggest drug company in the world. But it was not long before the dream went sour: with a rapidity that must have dismayed even the gnomic Sir Paul, the group seemed to lose its grip. Sir Paul's inability to work alongside a string of possible successors from Bernard Taylor to Ernest Mario led to accusations of autocracy.

Glaxo's strategy in a world in which healthcare reform meant the emphasis suddenly and aggressively became directed towards value for money and against expensive drugs like Zantac, also came under attack. The cruelest commentators said he ought to go but Sir Paul seemed determined to cling to power despite his 68 years. His appointment of Sir Richard Sykes as chief executive to replace Dr Mario at first only added to those concerns. With a background in Glaxo's research and development arm, he looked like a cipher, put in place to do Sir Paul's bidding.

Yet that is far from how he has turned out. He has rapidly won the respect of both his colleagues and the City; equally he has gained the affection of his employees.

Even so, he will not have long to prove himself. The market is torn over whether Glaxo should follow Merck and SmithKline Beecham and spend its billions on a US pharmaceutical benefit manager.

If Sir Richard, like SmithKline's Jan Leschly, launches a bid within days of taking the reins, the market may give him the benefit of the doubt. It is rightly suspicious, however. Smithkline probably overpaid for Diversified Pharmaceutical Services and Sir Richard may, if he is not careful, allow himself to be dragooned into doing the same in talks with McKesson. This is a key deal for Glaxo; it may well end up determining whether Sir Richard too has found his time and place in corporate history.

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