GlaxoSmithKline rejected e-cig buy to beef up stop-smoking franchise

GlaxoSmithKline CEO Andrew Witty

GlaxoSmithKline ($GSK) is feeling the e-cigarette burn, as sales from the products encroach on its smoking-cessation market share. But the British drugmaker is not planning to join the competition with its own e-cigarette products anytime soon, CEO Andrew Witty told Reuters.

GSK spent "a few days" exploring whether the drugmaker should enter the market by becoming an e-cigarette maker, but then decided "we're not going to play," Witty said. "Of course, it's definitely taken a bit of our market, no question at all--but there's a lot of competition in that space, anyway."

The drugmaker's nicotine replacement therapies (NRT) and smoking cessation products are mainly are sold as patches or gum, and include the brands Nicorette, NicoDerm CQ and the drug Zyban. In 2014, GSK pushed for heightened restrictions on e-cigarettes in Europe, asking the European Commission (EC) to follow in the U.K.'s footsteps by requiring that e-cigarettes be licensed as medicines.

Throwing a few regulatory hurdles in e-cigarettes' path could help GSK and its fellow stop-smoking product makers such as Johnson & Johnson ($JNJ) and Novartis ($NVS), as they try to stave off competition in a rapidly growing market. E-cigarettes were predicted to bring in $7 billion in sales by the end of 2014, a number that could deliver a blow to drugmakers producing traditional gums and other quit-smoking products. A study last year found smokers who switch to e-cigarettes to kick their habit are more likely to succeed in quitting or cutting down than smokers who use nicotine patches, Reuters notes.

Still, there could be some light at the end of the tunnel for GSK's smoking cessation franchise, as it forges ahead with a consumer health joint venture with Novartis. As part of a larger set of deals last April, the two drug giants decided to team up with a J.V. dubbed GSK Consumer Healthcare, run by the U.K. drugmaker. The joint effort will add Novartis' own smoking-cessation products--including its Nicotinell gum--to the GSK line-up, giving the combined business a bigger foothold in a stop-smoking market expected to reach $16 billion by 2019.

The new business might have had another product for the stop-smoking lineup if not for antitrust regulators. To clear the pending deal, the U.S. Federal Trade Commission asked Novartis to sell its Habitrol nicotine patch business to India's Dr. Reddy's Laboratories. Habitrol chalked up some $58 million in sales in 2013, the FTC said at the time.

Meanwhile, GSK continues to lay out restructuring plans to improve its bottom line. The company last year weighed a sale of its aging drug portfolio, but in December decided to hold onto the products after evaluating bids. GSK also said it would cut at least 900 sales and research jobs in the U.S. as part of a $1.6 billion restructuring effort, with 350 jobs to be slashed in the first quarter of 2015, another 450 in Q2 and the rest later in the year.

- read the Reuters story

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