Christian Stadler

Does an ingredient in heartburn drug Zantac cause cancers? A first trial set for today in Madison County, Illinois, was recently dropped by the plaintiff.

The legal battle to answer this question, however, is not over and could cost a dozen defendants including GSK, Pfizer, and Sanofi up to $45 billion.

The prospect has already sent investors fleeing. Pharma groups lost $30 billion of value in just two days as a result of a big sell-off.

With this frenzy in mind, GSK executives are unlikely to find much cause to celebrate Zantac today. Forty years ago, this was a very different story. Zantac turned GSK (then Glaxo) from a mid-sized British company into Big Pharma.

Even more remarkable, Zantac was only a me-too product, excelling due to an unconventional, yet genius strategy: turn being second into an advantage, charge a higher price, and overcome weaknesses through sales partnership.

Unleash second mover advantage

In the 1970s the pharma industry was hard at work to create an anti-ulcer drug (previously the only option was surgery). Smith Kline came out on top, launching Tagament in 1976. It quickly became the world’s best-selling drug.

Glaxo participated in the race only to the extent that it conducted research that would allow it to become a fast follower. Or, as it turned out, a not so fast follower. Glaxo was not ready to launch Zantac, which worked in a similar manner to Tagamet, until 1981.

Conventional wisdom suggested that Zantac could carve out a small market, stressing the convenience for patients as it required less dosages per day. Another potential advantage were early indications—though not hard proof—of fewer side effects.

Glaxo, however, decided to take an aggressive marketing stance. Their logic was appealing and simple: everyone understands how Zantac works as they are familiar with Tagamet. All we need to do is convince them that Zantac is better.

In other words, the company unleashed its aggressive salesforce to make the most of its advantage on dosage and side-effects. The genius part of this strategy was reframing the apparent disadvantage of a late-comer into an advantage of familiarity.

Unconventional price strategy

Glaxo’s marketing team developed three pricing options: low price and high volume, high price and low volume, and medium price and medium volume. The team preferred the first option and predicted a market share of 43 per cent by 1986.

Paul Girolami, the CEO, was adamant to do something unusual. Tagamet was going for £13.50 a package for wholesale. Girolami wanted to charge £24.

His logic was that intuitively we connect high price with high quality. By charging a premium Glaxo would position itself as a major advance rather than a monopoly buster.

Zantac eventually launched at a wholesale price between £23 and £28.


The Achilles heel of Glaxo’s strategy was the US market. Glaxo was active there since 1972 and acquired Meyer Laboratories in 1977. However, the sales team was only 300 strong - not sufficient to turbo-charge Zantac.

Once again, the company opted for, what was at the time, a rather unusual approach: finding a partner. Negotiations with Bristol-Meyer stalled but Hoffmann-La Roche was interested.

Patent protection for blockbuster Valium was expiring and the company needed something new. A deal was struck where Roche‘s sales force was guaranteed a 40 revenue share on a increasing scale.

With a sales team of 1,000 there were enough boots on the ground to market Zantac aggressively.

Zantac was a triumph of marketing not research

The combination of these three unconventional approaches turned Zantac into the best selling drug of all time.

By 1985 the market share in the UK was 50 per cent and global sales reached £432 million. The midsized UK pharmaceutical company moved into the Big Pharma league.

The headaches Zantac is creating for executives today should not detract from how it fuelled Glaxo’s historic rise.

In doing so, it provided a business lesson that may now outlive the shelf life of the drug: smart execution is as important as the development of exciting new products.


Further reading:

Stadler, C., Helfat, C. and Verona, G. 2022, Transferring knowledge by transferring individuals : innovative technology usage and organizational performance in multi-unit firms, Organization Science, 33, 1, 253-274

Shirodkar, V., Rajwani, T., Stadler, C., Hautz, J. and Mayer, M. C. J. 2022, Corporate political activity and firm performance : the moderating effects of international and product diversification, Journal of International Management, 28, 4, 100941

Christian Stadler is Professor of Strategic Management and teaches Strategic Advantage on the Distance Learning MBA.

Follow Christian Stadler on Twitter @EnduringSuccess.

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This article was republished from Forbes.