Red Wine Turns to Vinegar: At Glaxo, a String of Deals Has Gone Sour

GlaxoSmithKline (GSK)'s censure of two executives responsible for developing the red-wine chemical resveratrol as a prescription drug because they were caught selling it as a diet supplement on the side isn't just a lesson about how managers should avoid conflicts of interest: It's also a reminder that this is the third recent deal that GSK has made that's turned into a headache.

The two execs came with GSK's $720 million acquisition of Sirtris, a company that specialized in developing resveratrol. GSK has said it will invest $1 billion in the compound, which has reputed life-extending and anti-cancer effects. Those efforts saw a setback recently, according to The Street:

In April, Glaxo terminated a clinical trial of its resveratrol drug SRT501 in multiple myeloma after some patients developed kidney damage. Other studies of Glaxo's resveratrol drugs have either been completed or are still enrolling patients.

The Sirtris deal follows two others in which GSK has spent a lot but not yet gained a lot. It recently paid $37 million to Sepracor (now known as Sunovion) for the right to market the sleeping pill Lunesta in Europe, and then backed out of that deal after it conflicted with a $3.3 billion deal with Actelion for its in-development insomnia drug, almorexant.

Why GSK would pay such a huge sum for a drug in a category that is littered with cheap generic alternatives, including giant brands such as Sanofi-Aventis (SNY)' Ambien, is a mystery. Still, assuming GSK had some strategic logic for the deal, how is to coming along? Not well. According to Actelion, "certain safety observations" cropped up in its Phase III testing and the company had a meeting about the drug with the FDA. No details were given.

Ironically, maybe the Sirtris execs had the right idea: Selling resveratrol as an unregulated diet supplement might be a lot more lucrative than GSK's other deal strategies.

Related:

• The FDA Strikes Back: Criminal Probe of Glaxo Seeks to Chill Data Manipulation
  
• End of Sepracor-GSK Deal Raises Question in Lunesta Patent Fight