Strings attached as drug giants finalise tie-up.
Regulators are taking a harder look at the tie-up than their European counterparts, who approved the merger last month. This is especially true in areas like anti-depressives and diabetes that the new firm might dominate, industry officials and analysts say.
The scrutiny is delaying approval of the merger, which will create a firm with a global market share of 7.5 per cent.
The companies aim to complete the merger by the end of summer.
'The merger's been going a lot slower than people thought,' said Mr Bill Blair, an industry analyst at Nomura in London.
Despite that, long-term benefits of the merger from the new firm's power to market medicines and license drugs from smaller companies will overcome any worries about short-term pain.
'There may be some strict conditions on the merger, but nothing that's going to make anyone rethink the logic of putting these two companies together. It will be a great combination,' said Mr Mark Ravera, of Mehta Partners brokerage in New York.
Glaxo chairman Sir Richard Sykes predicted in February that regulators would give the green light in late March, and both companies thought they would easily be finished by late July.
Both, however, insist their original timetable - sometime during the summer - is intact.
'We're still on track for the summer. It depends on what one's definition of summer is, but for most of the world that means June, July, August and September,' said SmithKline's Mr Alan Chandler.
Glaxo spokesman Mr Martin Sutton said: 'There are a large number of joint task forces between SmithKline and Glaxo and work toward the merger is progressing extremely well.'
If the US Federal Trade Commission waits at least another few weeks - as expected - to approve the tie-up, however, it would take nearly two more months for both firms to get approval from both shareholders and the British High Court.
The delay would do little except postpone the benefit of having cost savings filter down to the bottom line.
'The delay is not especially bad, but it also creates a vacuum of news about the companies, so people begin to worry,' said Mr John Wilson, head of UK equities at Standard Life Investments in Edinburgh.
One of the major concerns is what regulators will decide in terms of disposals.
The two companies are largely complementary in their products. But there are some possible trouble-spots.
Analysts expect US regulators to follow the European ruling that SmithKline disposes of cancer-related nausea drug Kytril and herpes treatment Famvir. Sales of those products are seen at nearly pounds 400 million this year.
But there are signs the FTC could go further.
In approving the Pfizer-Warner Lambert merger last week to create the world's number two drugs firm, regulators ruled Warner had to end its association with Celexa, a drug used to treat depression that competes with Pfizer's Zoloft.
Celexa and Zoloft's 22.8 per cent market share for new treatments is similar to the combined market share of Glaxo's Wellbutrin, expected to generate pounds 390 million in sales this year, and SmithKline's Paxil.
'As it did with Pfizer, the FTC may demand the licensing out of Wellbutrin in addition to Kytril and Famvir,' French brokerage Oddo Pinatton told clients.
Another area of concern is diabetes, where Glaxo's promising GI262570 compound will compete with SmithKline's Avandia in treating the adult-onset version of the illness.
Analysts are divided as to whether Glaxo will be asked to license out its compound, which has performed even better than Avandia - a similar type of drug known as glitazones - in intermediate clinical trials.
'It would strike me as a bit unfair. The diabetes market is huge and Glitazones is only one way of treating diabetes. There are lots of other products around,' said Merrill Lynch analyst Mr James Culverwell.
Other overlapping areas are antibiotics and anti-ulcers, although analysts say the chances of restrictions in those markets are slimmer.
Overall, the restrictions could tally about pounds 750 million in foregone sales - some 4.5 per cent of 2000 sales.