Challenges Persist for Glaxo

A string of high-profile setbacks isn't what Jean-Pierre Garnier envisioned as he enters the home stretch as CEO of GlaxoSmithKline(GSK Quote).

Back in 2006, he agreed to delay his retirement until May 2008, instead of October 2007, so he could shepherd the launch of new drugs with alluring revenue prospects.

Instead, Garnier is spending much of his time defending the diabetes drug Avandia, coping with regulatory and scientific delays for two touted compounds and supervising a giant stock repurchase due to Glaxo's slumbering shares.

Despite its recent woes, Glaxo has fans who say the company is too big to fail thanks to its many drugs on the market and in the lab. Several veteran products continue to produce double-digit sales gains, and the U.S. vaccine business is healthy.

Promising newcomers include the breast-cancer drug Tykerb and the allergy medication Veramyst. A key product, still under regulatory review in the U.S. and European Union, is Cervarix, a vaccine against the virus that causes cervical cancer.

"Diversity is Glaxo's biggest strength," says Heather Brilliant of the independent research firm Morningstar. "Clearly, Avandia will be an overhang for awhile. But Glaxo can withstand the bumps that affect other companies."

Morningstar gives Glaxo four stars out of a possible five. "Overall, people are negative for pretty short-term issues that Glaxo can overcome," she says.

However, others say the new and experimental drugs won't offset revenue surrendered from products that have lost patent protection or will lose exclusivity in the next few years. If Glaxo is too big to fail, it's also too big to grow significantly without developing more mega-medications.