Spitzer sugars Glaxo's pill

THE £1.4m financial settlement agreed by GlaxoSmithKline over serious allegations about its antidepressant Seroxat is hardly a bitter pill for the multi-billion-pound drugs giant.

The payment exacted by crusading New York state attorney general Eliot Spitzer is - as we point out below - only half a year's salary for GSK chief executive Jean Pierre Garnier and a tiny fraction of the group's £6.3bn profits for last year.

It seems almost derisory considering allegations over the drug's links to suicidal tendencies in children.

Spitzer's initial accusation that GSK had concealed information about the safety and effectiveness of Seroxat, known as Paxil in the US, sent the shares down 3%.

They bounced 27p to 1131p in London and 28.8p to 2266p by lunchtime on Wall Street as traders registered their astonishment at Spitzer's apparent leniency.

The real meat of the settlement, though, is in Glaxo's agreement to publish information about all clinical trials on its drugs on a register on its website.

The group took the initiative earlier this summer to post the trials. Yesterday's deal gold-plates important details including how quickly it will disclose information and how long the register will continue. The Seroxat/Paxil trials are already disclosed and GSK hopes to have the full register operating shortly.

GSK is not totally out of the woods. It is still under investigation by UK medicines regulator the MHRA and it faces class action lawsuits in the US.

Spitzer suggests that GSK, which along with US giant Eli Lilly has led the way in posting trial results, has set an example for the rest of the industry. It sounds very much as if he has others in his sights.

Rat pack

RENTOKIL chairman Brian McGowan is a formidable axeman, getting rid of both former boss Sir Clive Thompson and then the lacklustre James Wilde.

The question now is whether he has the right ideas to rebuild the pest-control group which has in recent years lost its way after reporting stellar growth for most of Sir Clive's long reign.

McGowan's strategic review was greeted with disappointment by traders. By his own admission, there was nothing dramatically new - rather it is a continuation of measures put in place by the unfortunate Wilde.

The review dashed hopes of a break-up or major disposals. Indeed, rather than sales, McGowan flags a takeover push of his own and an increase in marketing and IT costs.

This underlines the chasm between him and Sir Clive, who wanted to return £750m to shareholders by selling off the parcels and conference arms.

McGowan believes that would have been a mere 'sideshow' at best neutral for shareholders.

He insists it is not the structure of the group that is a problem, but the way it has been operating.

The clear suggestion is that Sir Clive had been delivering high growth by cutting corners on investment in computer systems, innovation and marketing, leading to poorer service.

Much of McGowan's plan is about changing the corporate culture by rewarding and motivating its 90,000 staff. They will probably need it.

Sir Clive - who famously described dealing with unions as 'pest control' - may not have been the most nurturing of bosses. McGowan is a highly-respected operator, best known for building conglomerate Williams Holdings with Sir Nigel Rudd.

He will need all his skills to effect a turnaround at Rentokil which is up against shrinking profit margins and tough competition in its core markets.

Hopes persist of a takeover, with Sir Clive himself lurking in the wings like a pantomime villain, possibly plotting revenge.

McGowan would certainly sell out at the right price, but the venture capitalists will be looking to trap Rentokil on the cheap. Shareholders would be unwise to bank on a generous rescue.

As an adviser to the Higgs report on corporate governance, McGowan is giving a demonstration of how it works. Instead of sitting back and drawing his £50,000 salary, he took dramatic action when he felt executives were going astray.

He must now be hoping it works out. If not, he could end up looking rather foolish.

He's serious

SOME in the City continue to believe that HBOS is not serious about a bid for rival Abbey, but is more bent on making trouble for its Spanish suitor Santander.

The revelation that HBOS supremo James Crosby sounded out Abbey's Luqman Arnold about a possible takeover several months ago should put paid to that idea.

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