“… investigations unearthed manufacturing issues that included micro-organisms in Bactroban ointment, a topical antibiotic used to treat skin infections in babies; non-sterile doses of Kytril injection, an anti-nausea drug used by cancer patients; Paxil CR tablets for depression that lacked the active ingredient; and Avandamet tablets for diabetes that were super-potent and sub-potent.”
The issues have been on the table since at least 2003, and the costs were booked in the 2nd quarter financial results. Still, the lack of reputational consequences other than what may be minor recent equity movement is curious.
Over the trailing twelve months, GSK’s reputation ranking as measured by the Steel City Re Corporate Reputation Index rose from the 92nd to the 96th percentile among the 233 companies that comprise the ethical drug manufacturers sector. The exponentially weighted reputation moving average volatility was barely measurable at 0.3%, and the trailing twelve week velocity and vector values were 0. Its intangible asset fraction has been flat at nearly 100% which is greater than the industry mean of about 83%. In fact, the only sign that anyone was trading the stock was the fall in equity value so that the company’s performance this past year is about 7% below the median of this peer group.
Stakeholders may not have reacted to a large extent for one of several reasons. One could be that GSK’s reputation is so strong and resilient that this minor event was viewed as an aberration rather than a core risk. Another could be that, as with the airline industry, stakeholders have become complacent. The latter explanation is consistent with the relatively low ranking of the entire sector (less than 20th percentile) and its decreasing internal volatility.
Ho hum, indeed.
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