After having been one of the UK's most successful companies for more than two decades, Glaxo Wellcome is suddenly facing a series of commercial reversals that has everybody asking, "What ails Glaxo?"

For a company that is on the throes of becoming the world's largest pharmaceutical company on its merger with arch-rival SmithKline Beecham receiving formal approval from regulators, the withdrawal, last week, of its potential billion-dollar drug, Lotronex, from the market on safety grounds was the final straw.

But Glaxo's shares have not yet been impacted. Its ability to discover new products and launch them is continuing unabated. So what went wrong? The company has already recalled three products from the market – Lotronex (a drug for irritable bowel syndrome), Raxar (an antibiotic) and Romozin (a drug for diabetes). Its launch in the market of its latest product, Relenza (a drug for flu) has been lacklustre and well below expectations.

Analysts are beginning to question how a company with a formidable reputation for being hard-nosed and commercially-driven could have slipped up! Glaxo's rise to fame came with its phenomenal success of its anti-ulcerant, Zantac, which was in direct competition with such products like Tagamet of SmithKline. Sheer marketing brilliance ensured that Zantac became the best selling medicines of all times, and gave Glaxo a very healthy revenue growth.

Serious Glaxo-watchers believe that this situation has come about due to the fact that Glaxo has subordinated its commercial and marketing brilliance, which was its core competency, at the altar of innovation. And while it continued to innovate, the lack of marketing brilliance proved detrimental to the company. This change came about with the change in the chairman of the company. Around the time that the Zantac patent ran out, the company appointed Sir Richard Sykes, who was with research and development, as chairman. Sir Sykes had the aim of transforming Glaxo into a scientific innovator.

With the threat of losing its hold on the gastro-intestinal arena with the out-of-patent Zantac, Glaxo aggressively pushed Lotronex, a drug to treat the condition of irritable bowel syndrome. With the hope that the pathbreaking and exciting drug would capture the lost shine of Zantac, Glaxo pushed hard to launch Lotronex earlier this year. But the drug ran into a tough regulatory environment in the US. When reports of side effects - including at least three fatalities - emerged, the drug, which cost hundreds of millions to develop, was withdrawn.

Another breakthrough drug, Relenza, which is targeted at the elusive flu virus, was also noticed to have side effects, although these are not dramatic.

Glaxo's aim to become a leading innovator of new medicines and molecules is, indeed, very laudable. But scientific achievement can only translate into commercial brilliance when the entire process is seamlessly, and in the case of pharmaceuticals, flawlessly, handled. When companies enter the "innovation" arena they take a much greater risk. A pioneering role in introducing new molecules must be based on a company's ability to cover all aspects of safety and drug efficacy at the clinical trial level.

By its very nature, clinical trials, conducted on a few thousand people, tend to miss out on rare side effects that could emerge when a product is widely prescribed after launch. And this is exactly what happened with the slew of launches from Glaxo – Lotromex, Romozin, Raxar and Relenza.

Glaxo's previous performance was based on a very sound commercial model that saw it adopt a two-pronged strategy to reformulate old drugs and introduce new drugs. A bulk of the company's efforts went in taking old medicines, reformulating them into easier-to-take variants and marketing them brilliantly. This was interspersed with a few notable breakthroughs like Imigran (a drug for migraine) and Zofran (a drug for chemotherapy-related nausea). The mix between the two ensured that the Glaxo growth was always on the upswing.

Glaxo's trouble seems to have begun when it only focussed on meeting the needs of the medical fraternity through innovation and new drug discoveries. Perhaps, what the company needs to do is to take a hard look at its clinical trial processes and increase the trial base before launching a drug into the market.

Considering that this approach helps society in the larger context, it would be a shame if the company gave up its innovative spirit in pursuit of "market dominated financial results".