Description
It describes about Pharmaceutical Industry Trends, PEST Analysis of Pharmaceutical Industry, Competitor Analysis, SWOT analysis Pharmaceutical industry, Company Description, General Information about GlaxoSmithKline, it's Finance performance, SWOT analysis of GlaxoSmithKline and Various Strategies employed.
Indian Pharmaceutical Industry The Indian pharmaceutical sector has come a long way, being almost non-existent before 1970 to a prominent provider of healthcare products, meeting almost 95 per cent of the country's pharmaceuticals needs. Indian pharmaceutical industry boasts of quality producers and many units approved by regulatory authorities in USA and UK. The Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered units with severe price competition and government price control. It has expanded drastically in the last two decades. Following the de-licensing of the pharmaceutical industry, industrial licensing for most of the drugs and pharmaceutical products has been done away with. Manufacturers are free to produce any drug duly approved by the Drug Control Authority. The total Indian production constitutes about 13 per cent of the world market in value terms and, 8 per cent in volume terms. With the signing of General Agreement on Tariffs and Trade in January 2005 with which India began recognizing global patents. This introduction of product patent regime from January 2005 is leading into long-term growth for the future which mandated patent protection on both products and processes for a period of 20 years. Indian companies such as Ranbaxy, Sun Pharma, and Dr. Reddy's are increasingly focusing on tapping the U.S. generic market. Emerging Trends: The Indian pharmaceutical industry is now discovering new opportunities of growth in clinical research, contract research, manufacturing and innovation opportunities. Increased generic penetration, intense competition, fragmentation of the industry has negatively impacted the overall value growth of the domestic pharmaceutical market. India with its apt chemistry skills and low cost advantages, both in research and manufacturing coupled with skilled manpower will attract a lot of business in the days to come. FMHGs(Fast Moving Health Goods) is a new concept used increasingly in India. Many a company has taken the direct route to the consumer’s home just like consumer product. This has led to an increase in the incidence of self-medication and rising sales volumes for the industry. PEST Analysis Political factors: The Government provides many fiscal incentives for exports such as Excise duty exemption, Exports subsidy, packing credits; export Financing, IT advantages, exemptions from Local laws etc. Effective the January, 2005 the Government has shifted from charging the Excise Duty on the cost of manufacturing to the MRP thereby making the finished products more costly. Economic factors: The incidence of taxes is very high. On an average it amounts to no less than 40-45% of the costs. Adequate storage and transportation facilities for special drugs are lacking. A study had indicated that nearly 60% of the Retail Chemists do not have adequate refrigeration facilities and store drugs under suboptimal conditions. This affects the quality of the drugs administered and of course adds to the costs. Social factors: Poverty and associated malnutrition dramatically increases the incidence of Malaria and TB, preventable diseases that continue to play havoc in India decades after they were eradicated in other countries.
Technological factors: Advances in Bio-technology, Stem-cell research have given India a step forward. Newer medication, molecules and active ingredients are being discovered. As of January 2005, the Government of India has more than 10,000 substances for patenting. SWOT Analysis of the pharmaceutical industry Strengths 1. Indian with a population of over a billion is a largely untapped market. In fact the penetration of modern medicine is less than 30% in India. To put things in perspective, per capita expenditure on health care in India is US$ 93 while the same for countries like Brazil is US$ 453 and Malaysia US$189. 2. The growth of middle class in the country has resulted in fast changing lifestyles in urban and to some extent rural centres. This opens a huge market for lifestyle drugs, which has a very low contribution in the Indian markets. 3. Indian manufacturers are one of the lowest cost producers of drugs in the world. With a scalable labor force, Indian manufactures can produce drugs at 40% to 50% of the cost to the rest of the world. In some cases, this cost is as low as 90%. 4. Indian pharmaceutical industry possesses excellent chemistry and process reengineering skills. This adds to the competitive advantage of the Indian companies. The strength in chemistry skill helps Indian companies to develop processes, which are cost effective. Weakness 1. The Indian pharma companies are marred by the price regulation. Over a period of time, this regulation has reduced the pricing ability of companies. The NPPA (National Pharma Pricing Authority), which is the authority to decide the various pricing parameters, sets prices of different drugs, which leads to lower profitability for the companies. The companies, which are lowest cost producers, are at advantage while those who cannot produce have either to stop production or bear losses. 2. Indian pharma sector has been marred by lack of product patent, which prevents global pharma companies to introduce new drugs in the country and discourages innovation and drug discovery. But this has provided an upper hand to the Indian pharma companies. 3. Indian pharma market is one of the least penetrated in the world. However, growth has been slow to come by. As a result, Indian majors are relying on exports for growth. To put things in to perspective, India accounts for almost 16% of the world population while the total size of industry is just 1% of the global pharma industry. 4. Due to very low barriers to entry, Indian pharma industry is highly fragmented with about 300 large manufacturing units and about 18,000 small units spread
across the country. This makes Indian pharma market increasingly competitive. The industry witnesses price competition, which reduces the growth of the industry in value term. To put things in perspective, in the year 2003, the industry actually grew by 10.4% but due to price competition, the growth in value terms was 8.2% (prices actually declined by 2.2%) Opportunities 1. The migration into a product patent based regime is likely to transform industry fortunes in the long term. The new patent product regime will bring with it new innovative drugs. This will increase the profitability of MNC pharma companies and will force domestic pharma companies to focus more on R&D. This migration could result in consolidation as well. Very small players may not be able to cope up with the challenging environment and may succumb to giants. 2. Large number of drugs going off-patent in Europe and in the US between 2005 to 2009 offers a big opportunity for the Indian companies to capture this market. Since generic drugs are commodities by nature, Indian producers have the competitive advantage, as they are the lowest cost producers of drugs in the world. 3. Opening up of health insurance sector and the expected growth in per capita income are key growth drivers from a long-term perspective. This leads to the expansion of healthcare industry of which pharma industry is an integral part. 4. Being the lowest cost producer combined with FDA approved plants, Indian companies can become a global outsourcing hub for pharmaceutical products. Threats 1. There are certain concerns over the patent regime regarding its current structure. It might be possible that the new government may change certain provisions of the patent act formulated by the preceding government. 2. Threats from other low cost countries like China and Israel exist. However, on the quality front, India is better placed relative to China. So, differentiation in the contract manufacturing side may wane. 3. The short-term threat for the pharma industry is the uncertainty regarding the implementation of VAT. Though this is likely to have a negative impact in the short-term, the implications over the long-term are positive for the industry.
GlaxoSmithKline: A brief introduction GlaxoSmithKline plc (GSK) is a British multinational pharmaceutical, biologics, vaccines and consumer healthcare company headquartered in London, United Kingdom. It is the world's fourth-largest pharmaceutical company measured by 2009 prescription drug sales. It was established in 2000 by the merger of Glaxo Wellcome plc (formed from the acquisition of Wellcome plc by Glaxo plc) and SmithKline Beecham plc (formed from the merger of Beecham plc and SmithKline Beckman Corporation, which was formed by combining the Smith Kline French and Beckman companies). It employs over 97,000 people in offices over 100 countries and major research centres in the UK, USA, Spain, Belgium and China. It is one of the few healthcare companies researching both medicines and vaccines for the World Health Organization’s three priority diseases – HIV/AIDS, tuberculosis and malaria GSK has a portfolio of products for major disease areas including asthma, cancer, virus control, infections, mental health, diabetes, and digestive conditions.[4] It also has a large consumer healthcare division which produces and markets oral healthcare and nutritional products and over-the-counter medicines including Sensodyne, Boost, Horlicks, and Gaviscon. GSK has a primary listing on the London Stock Exchange and is a constituent of the FTSE 100 Index. As of 6 July 2012, it had a market capitalisation of £74.8 billion, the fifth-largest of any company listed on the London Stock Exchange.[9] It has a secondary listing on the New York Stock Exchange. (Source: Wikipedia) Board of Directors • Sir Christopher Gent - Non-Executive Chairman • Sir Andrew Witty - Chief Executive Officer • Simon Dingemans - Chief Financial Officer • David Redfern - Chief Strategy Officer • Dr Moncef Slaoui - Chairman, Research & Development Shareholding pattern: (Source: The Economic Times) Holder's Name Directors Foreign Promoters Foreign Institutions General Public Financial Institutions Mutual Funds Other Companies Others Foreign NRI Foreign corporate bodies No of Shares 2395 42917488 15532350 12028564 9587529 2423433 1612047 377034 221883 294 % Share Holding 0.00% 50.67% 18.34% 14.20% 11.32% 2.86% 1.90% 0.45% 0.26% 0.00%
GlaxoSmithKline India: Established in the year 1924 in India GlaxoSmithKline Pharmaceuticals Ltd. (GSK Rx India) is one of the oldest pharmaceuticals company and employs over 3500 people. In India, it is one of the market leaders with a turnover of Rs. 2699 crore and a share of 4.2%. The GSK India product portfolio includes prescription medicines and vaccines. Our prescription medicines range across therapeutic areas such as anti-infectives, dermatology, gynaecology, diabetes, oncology, cardiovascular disease and respiratory diseases. The company is the market leader in most of the therapeutic categories in which it operates. GSK also offers a range of vaccines, for the prevention of hepatitis A, hepatitis B, invasive disease caused by H influenza, chickenpox, diphtheria, pertussis, tetanus, rotavirus, cervical cancer, streptococcus pneumonia and others.(source: www.gsk-india.com) Financial performance for the fiscal year 2011 as reported by the company SALES: There are three primary areas of business: Pharmaceuticals, Vaccines and Consumer Healthcare. The total turnover for the fiscal year 2011was £27.4 billion. SALES DOMAIN Pharmaceuticals Vaccines Consumer Healthcare TURNOVER BY SEGMENT: US Pharmaceuticals and Vaccines Europe Pharmaceuticals and Vaccines Emerging Markets Pharmaceuticals and Vaccines Japan Pharmaceuticals and Vaccine Asia Pacific Pharmaceuticals and Vaccines ViiV Healthcare Other trading Consumer Healthcare TURNOVER BY REGION USA Europe Emerging Markets Asia Pacific 8.7 £bn 8.3 £bn 5.3 £bn 1.8 £bn 7.0 £bn 5.8 £bn 3.7 £bn 2.1 1.2 1.6 0.8 5.2 £bn £bn £bn £bn £bn SALES VALUE £18.7bn £3.5bn £5.2bn SALES PERCENTAGE 68% 13% 19%
Japan Other
2.3 £bn 1.0 £bn
Consolidated income statement for the year ended 31 December 2011 Total £m 27,387 7,332 20,055 8826 4009 587 7807 90 799 585 15 7698 2240 5458 197 5261 104.6p 103.2p
Turnover Cost of sales Gross profit Selling, general and administration Research and development Other operating income Operating profit Finance income Finance costs Profit on disposal of interest in associates Share of after tax profits of associates and joint ventures Profit before taxation Taxation Profit after taxation for the year Profit attributable to non-controlling interests Profit attributable to shareholders Basic earnings per share (pence) Diluted earnings per share (pence) SWOT Analysis Strengths •
• •
GlaxoSmithKline possesses a strong global manufacturing and supply network spread across more than 100 countries. With a network of 74 sites in 32 countries, Global Manufacturing and Supply (GMS) model ensures the supply, quality and security of all the products to every region of the world. It possesses strong business fundamentals and robust balance sheet. Over the years it has developed focused R&D capabilities. R&D organisation has been expanded so that it is better able to sustain an industry-leading pipeline of products that offers valuable improvements in treatment for patients and healthcare providers.
• •
It possesses a balanced business and product portfolio capable of delivering sustainable sales growth in all the business areas of pharmaceuticals, vaccines and consumer healthcare. It has recorded consistently strong financial performance over the years.
Weakness • • Out Dated IT System: The underinvestment of GSK in IT systems is a major obstacle to operating performance, cash conversion and bolt-on acquisitions. Patent Expiry: The life of a patent in most countries is 20 years from the ?ling date. However the long development time for pharmaceutical products may result in a substantial amount of this patent life being used up before launch. GSK is also facing the patent expiry for a number of bulk-buster products. Financial Penalties: Recently the company was fined with $3 billion by US authorities over charges that it marketed drugs for unauthorized uses, held back safety data, and cheated the government’s Medicaid program. Failure of the R&D pipeline to deliver initial commercial competition. The sudden decline in sales due to present financial constraints which are still having their affects globally also resulted in firing of large number of employees.
• • •
Opportunities • A vast experience in health and pharmaceutical industry gives them a competitive edge on others. • Large charitable grants for poor countries and areas may also give a big edge to the company as the good-will for the company in the eyes of customers and general public may increase • Product Approvals and Launches: GSK has got approval of launch of six products in USA and EU market. Recent Annual report of GSK shows a peerleading pipeline of 30 late stage assets. Ten new compounds and vaccines of GSK are in phase III clinical trials since the start of 2010. Having a number of new patents will generate cash for GSK to further invest in R&D and the new generic brand of GSK will give a tight competition to other pharmaceutical organizations • BITC Community Mark: GSK has become one of the first companies to be given the Community Mark by Business In The Community (BITC).GSK has been awarded this Community Mark because of its international initiatives, as well as its work at a local and national level within the UK. Through its Global Community Partnerships programs, GSK works with collaborating organisations to build strategic partnerships that generate mutual benefit for GSK, its partners and the beneficiaries of the programmes. Threats • • GSK is facing tough competition from the other pharmaceutical companies who market generic products against all of the major products of GSK. GlaxoSmithKline has been under significant pressure of late because of the New England Journal of Medicine showing greatly increased risks of a heart
•
• •
attack for diabetes patients that have taken AVANDIA, one of its most important drugs. This significantly reduced the sale of AVANDA. One of the most important threats that the GlaxoSmithKline is facing is the risk of the R&D. GSK invests about 14% of its sales in developing or researching new products. The outcome of not all the innovations, development processes or improvement planning is successful. New product initially may seem promising in development but, after huge investment of company's money, time and employees efforts, may fail to achieve desired results altogether or have only limited commercial success in terms of efficacy against disease or safety issues or drug reactions. Stringent regulatory environment: Drug regulatory authorities all over the world have increased regulatory concern on safety issues of drugs thus making it more difficult to gain approval for pharmaceutical products. Increasing pricing control: In some countries, major purchasers of pharmaceutical products involve directly in controlling the prices of pharmaceutical products as they have the economic power and choice of generic brands they use. This has a huge impact on the pricing control strategy of the company.
Strategies employed • As a part of the expansion of its innovation and high tech research capabilities, GSK entered into a long term strategic alliance with McLaren group. A strategic programme is currently being evaluated to apply McLaren’s engineering and technical expertise to GSK’s manufacturing processes. It is believed that the application of McLaren’s approach, technology and processes could lead to improvements in GSK’s production line performance, reducing the number of breakdowns and improving cost and customer service. McLaren’s expertise and technology could help drive improvements in clinical research processes by speeding up trial design and allowing for real time patient monitoring and treatment adjustment. GSK has implemented Price-Cutting Strategy in Emerging Markets. The price in those markets is below two-thirds of the price of the corresponding products in traditional Western markets. This price-cutting strategy will form the basis of GSK's emerging-market expansion. In addition to its price-cutting plans, GSK has outlined other key components of its emerging markets strategy. These include: Emerging Market Portfolio Expansion: GSK believes that providing a wider range of products in the emerging markets will enable the company to compete more effectively for government-procurement drug contracts. Central to this is the provision of off-patent brands acquired from other pharmaceutical companies. Local Manufacturing: Engaging in local manufacturing has enabled the company to control its costs, thereby allowing it to deliver the proposed price cuts. GSK's recent announcement of plans to manufacture its antiviral drug Relenza (zanamivir) in China in a move to improve access to the drug in the Chinese market is an example of this.
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• •
Volume Cuts: GSK plans to sell small packs of its drugs in the emerging markets in order to improve accessibility. GSK has finalised to acquire Human Genome Sciences (HGS) for 3 billion USD. The deal allows GSK to take full control of Benlysta, its jointly owned drug for lupus, an auto-immune condition that causes swelling joints and rashes, as well as other experimental medicines including albiglutide for Type 2 diabetes and darapladib for cardio-vascular disease.
Competitor Analysis GSK competes with different firms for sales of different types of medication. GlaxoSmithKline’s biggest competitors include Pfizer (PFE), Novartis AG (NVS), Merck (MRK), and Schering-Plough (SGP). Competition in the pharmaceutical industry lies mostly in specific drug markets. Advair, one of GlaxoSmithKline's biggest drugs for asthma (see above) faces competition from AstraZeneca's 's Symbicort. Avandia, the diabetes drug faces competition from Merck (MRK)'s new oral diabetes drugs Januvia and Janumet. With the FDA's decision to require extra warnings on Avandia concerning heart failure, Merck (MRK) may be able to expand its portion of the type 2 diabetes market. GSK’s toughest competition comes from generic drug makers. GSK and Merck are fiercely competing over treatment for HPV. Merck’s Gardasil has been approved for sale by the FDA and is expected to reach $1 billion in sales. GSK is trying to create a cheaper HPV vaccine with Cervarix.
doc_769846482.doc
It describes about Pharmaceutical Industry Trends, PEST Analysis of Pharmaceutical Industry, Competitor Analysis, SWOT analysis Pharmaceutical industry, Company Description, General Information about GlaxoSmithKline, it's Finance performance, SWOT analysis of GlaxoSmithKline and Various Strategies employed.
Indian Pharmaceutical Industry The Indian pharmaceutical sector has come a long way, being almost non-existent before 1970 to a prominent provider of healthcare products, meeting almost 95 per cent of the country's pharmaceuticals needs. Indian pharmaceutical industry boasts of quality producers and many units approved by regulatory authorities in USA and UK. The Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered units with severe price competition and government price control. It has expanded drastically in the last two decades. Following the de-licensing of the pharmaceutical industry, industrial licensing for most of the drugs and pharmaceutical products has been done away with. Manufacturers are free to produce any drug duly approved by the Drug Control Authority. The total Indian production constitutes about 13 per cent of the world market in value terms and, 8 per cent in volume terms. With the signing of General Agreement on Tariffs and Trade in January 2005 with which India began recognizing global patents. This introduction of product patent regime from January 2005 is leading into long-term growth for the future which mandated patent protection on both products and processes for a period of 20 years. Indian companies such as Ranbaxy, Sun Pharma, and Dr. Reddy's are increasingly focusing on tapping the U.S. generic market. Emerging Trends: The Indian pharmaceutical industry is now discovering new opportunities of growth in clinical research, contract research, manufacturing and innovation opportunities. Increased generic penetration, intense competition, fragmentation of the industry has negatively impacted the overall value growth of the domestic pharmaceutical market. India with its apt chemistry skills and low cost advantages, both in research and manufacturing coupled with skilled manpower will attract a lot of business in the days to come. FMHGs(Fast Moving Health Goods) is a new concept used increasingly in India. Many a company has taken the direct route to the consumer’s home just like consumer product. This has led to an increase in the incidence of self-medication and rising sales volumes for the industry. PEST Analysis Political factors: The Government provides many fiscal incentives for exports such as Excise duty exemption, Exports subsidy, packing credits; export Financing, IT advantages, exemptions from Local laws etc. Effective the January, 2005 the Government has shifted from charging the Excise Duty on the cost of manufacturing to the MRP thereby making the finished products more costly. Economic factors: The incidence of taxes is very high. On an average it amounts to no less than 40-45% of the costs. Adequate storage and transportation facilities for special drugs are lacking. A study had indicated that nearly 60% of the Retail Chemists do not have adequate refrigeration facilities and store drugs under suboptimal conditions. This affects the quality of the drugs administered and of course adds to the costs. Social factors: Poverty and associated malnutrition dramatically increases the incidence of Malaria and TB, preventable diseases that continue to play havoc in India decades after they were eradicated in other countries.
Technological factors: Advances in Bio-technology, Stem-cell research have given India a step forward. Newer medication, molecules and active ingredients are being discovered. As of January 2005, the Government of India has more than 10,000 substances for patenting. SWOT Analysis of the pharmaceutical industry Strengths 1. Indian with a population of over a billion is a largely untapped market. In fact the penetration of modern medicine is less than 30% in India. To put things in perspective, per capita expenditure on health care in India is US$ 93 while the same for countries like Brazil is US$ 453 and Malaysia US$189. 2. The growth of middle class in the country has resulted in fast changing lifestyles in urban and to some extent rural centres. This opens a huge market for lifestyle drugs, which has a very low contribution in the Indian markets. 3. Indian manufacturers are one of the lowest cost producers of drugs in the world. With a scalable labor force, Indian manufactures can produce drugs at 40% to 50% of the cost to the rest of the world. In some cases, this cost is as low as 90%. 4. Indian pharmaceutical industry possesses excellent chemistry and process reengineering skills. This adds to the competitive advantage of the Indian companies. The strength in chemistry skill helps Indian companies to develop processes, which are cost effective. Weakness 1. The Indian pharma companies are marred by the price regulation. Over a period of time, this regulation has reduced the pricing ability of companies. The NPPA (National Pharma Pricing Authority), which is the authority to decide the various pricing parameters, sets prices of different drugs, which leads to lower profitability for the companies. The companies, which are lowest cost producers, are at advantage while those who cannot produce have either to stop production or bear losses. 2. Indian pharma sector has been marred by lack of product patent, which prevents global pharma companies to introduce new drugs in the country and discourages innovation and drug discovery. But this has provided an upper hand to the Indian pharma companies. 3. Indian pharma market is one of the least penetrated in the world. However, growth has been slow to come by. As a result, Indian majors are relying on exports for growth. To put things in to perspective, India accounts for almost 16% of the world population while the total size of industry is just 1% of the global pharma industry. 4. Due to very low barriers to entry, Indian pharma industry is highly fragmented with about 300 large manufacturing units and about 18,000 small units spread
across the country. This makes Indian pharma market increasingly competitive. The industry witnesses price competition, which reduces the growth of the industry in value term. To put things in perspective, in the year 2003, the industry actually grew by 10.4% but due to price competition, the growth in value terms was 8.2% (prices actually declined by 2.2%) Opportunities 1. The migration into a product patent based regime is likely to transform industry fortunes in the long term. The new patent product regime will bring with it new innovative drugs. This will increase the profitability of MNC pharma companies and will force domestic pharma companies to focus more on R&D. This migration could result in consolidation as well. Very small players may not be able to cope up with the challenging environment and may succumb to giants. 2. Large number of drugs going off-patent in Europe and in the US between 2005 to 2009 offers a big opportunity for the Indian companies to capture this market. Since generic drugs are commodities by nature, Indian producers have the competitive advantage, as they are the lowest cost producers of drugs in the world. 3. Opening up of health insurance sector and the expected growth in per capita income are key growth drivers from a long-term perspective. This leads to the expansion of healthcare industry of which pharma industry is an integral part. 4. Being the lowest cost producer combined with FDA approved plants, Indian companies can become a global outsourcing hub for pharmaceutical products. Threats 1. There are certain concerns over the patent regime regarding its current structure. It might be possible that the new government may change certain provisions of the patent act formulated by the preceding government. 2. Threats from other low cost countries like China and Israel exist. However, on the quality front, India is better placed relative to China. So, differentiation in the contract manufacturing side may wane. 3. The short-term threat for the pharma industry is the uncertainty regarding the implementation of VAT. Though this is likely to have a negative impact in the short-term, the implications over the long-term are positive for the industry.
GlaxoSmithKline: A brief introduction GlaxoSmithKline plc (GSK) is a British multinational pharmaceutical, biologics, vaccines and consumer healthcare company headquartered in London, United Kingdom. It is the world's fourth-largest pharmaceutical company measured by 2009 prescription drug sales. It was established in 2000 by the merger of Glaxo Wellcome plc (formed from the acquisition of Wellcome plc by Glaxo plc) and SmithKline Beecham plc (formed from the merger of Beecham plc and SmithKline Beckman Corporation, which was formed by combining the Smith Kline French and Beckman companies). It employs over 97,000 people in offices over 100 countries and major research centres in the UK, USA, Spain, Belgium and China. It is one of the few healthcare companies researching both medicines and vaccines for the World Health Organization’s three priority diseases – HIV/AIDS, tuberculosis and malaria GSK has a portfolio of products for major disease areas including asthma, cancer, virus control, infections, mental health, diabetes, and digestive conditions.[4] It also has a large consumer healthcare division which produces and markets oral healthcare and nutritional products and over-the-counter medicines including Sensodyne, Boost, Horlicks, and Gaviscon. GSK has a primary listing on the London Stock Exchange and is a constituent of the FTSE 100 Index. As of 6 July 2012, it had a market capitalisation of £74.8 billion, the fifth-largest of any company listed on the London Stock Exchange.[9] It has a secondary listing on the New York Stock Exchange. (Source: Wikipedia) Board of Directors • Sir Christopher Gent - Non-Executive Chairman • Sir Andrew Witty - Chief Executive Officer • Simon Dingemans - Chief Financial Officer • David Redfern - Chief Strategy Officer • Dr Moncef Slaoui - Chairman, Research & Development Shareholding pattern: (Source: The Economic Times) Holder's Name Directors Foreign Promoters Foreign Institutions General Public Financial Institutions Mutual Funds Other Companies Others Foreign NRI Foreign corporate bodies No of Shares 2395 42917488 15532350 12028564 9587529 2423433 1612047 377034 221883 294 % Share Holding 0.00% 50.67% 18.34% 14.20% 11.32% 2.86% 1.90% 0.45% 0.26% 0.00%
GlaxoSmithKline India: Established in the year 1924 in India GlaxoSmithKline Pharmaceuticals Ltd. (GSK Rx India) is one of the oldest pharmaceuticals company and employs over 3500 people. In India, it is one of the market leaders with a turnover of Rs. 2699 crore and a share of 4.2%. The GSK India product portfolio includes prescription medicines and vaccines. Our prescription medicines range across therapeutic areas such as anti-infectives, dermatology, gynaecology, diabetes, oncology, cardiovascular disease and respiratory diseases. The company is the market leader in most of the therapeutic categories in which it operates. GSK also offers a range of vaccines, for the prevention of hepatitis A, hepatitis B, invasive disease caused by H influenza, chickenpox, diphtheria, pertussis, tetanus, rotavirus, cervical cancer, streptococcus pneumonia and others.(source: www.gsk-india.com) Financial performance for the fiscal year 2011 as reported by the company SALES: There are three primary areas of business: Pharmaceuticals, Vaccines and Consumer Healthcare. The total turnover for the fiscal year 2011was £27.4 billion. SALES DOMAIN Pharmaceuticals Vaccines Consumer Healthcare TURNOVER BY SEGMENT: US Pharmaceuticals and Vaccines Europe Pharmaceuticals and Vaccines Emerging Markets Pharmaceuticals and Vaccines Japan Pharmaceuticals and Vaccine Asia Pacific Pharmaceuticals and Vaccines ViiV Healthcare Other trading Consumer Healthcare TURNOVER BY REGION USA Europe Emerging Markets Asia Pacific 8.7 £bn 8.3 £bn 5.3 £bn 1.8 £bn 7.0 £bn 5.8 £bn 3.7 £bn 2.1 1.2 1.6 0.8 5.2 £bn £bn £bn £bn £bn SALES VALUE £18.7bn £3.5bn £5.2bn SALES PERCENTAGE 68% 13% 19%
Japan Other
2.3 £bn 1.0 £bn
Consolidated income statement for the year ended 31 December 2011 Total £m 27,387 7,332 20,055 8826 4009 587 7807 90 799 585 15 7698 2240 5458 197 5261 104.6p 103.2p
Turnover Cost of sales Gross profit Selling, general and administration Research and development Other operating income Operating profit Finance income Finance costs Profit on disposal of interest in associates Share of after tax profits of associates and joint ventures Profit before taxation Taxation Profit after taxation for the year Profit attributable to non-controlling interests Profit attributable to shareholders Basic earnings per share (pence) Diluted earnings per share (pence) SWOT Analysis Strengths •
• •
GlaxoSmithKline possesses a strong global manufacturing and supply network spread across more than 100 countries. With a network of 74 sites in 32 countries, Global Manufacturing and Supply (GMS) model ensures the supply, quality and security of all the products to every region of the world. It possesses strong business fundamentals and robust balance sheet. Over the years it has developed focused R&D capabilities. R&D organisation has been expanded so that it is better able to sustain an industry-leading pipeline of products that offers valuable improvements in treatment for patients and healthcare providers.
• •
It possesses a balanced business and product portfolio capable of delivering sustainable sales growth in all the business areas of pharmaceuticals, vaccines and consumer healthcare. It has recorded consistently strong financial performance over the years.
Weakness • • Out Dated IT System: The underinvestment of GSK in IT systems is a major obstacle to operating performance, cash conversion and bolt-on acquisitions. Patent Expiry: The life of a patent in most countries is 20 years from the ?ling date. However the long development time for pharmaceutical products may result in a substantial amount of this patent life being used up before launch. GSK is also facing the patent expiry for a number of bulk-buster products. Financial Penalties: Recently the company was fined with $3 billion by US authorities over charges that it marketed drugs for unauthorized uses, held back safety data, and cheated the government’s Medicaid program. Failure of the R&D pipeline to deliver initial commercial competition. The sudden decline in sales due to present financial constraints which are still having their affects globally also resulted in firing of large number of employees.
• • •
Opportunities • A vast experience in health and pharmaceutical industry gives them a competitive edge on others. • Large charitable grants for poor countries and areas may also give a big edge to the company as the good-will for the company in the eyes of customers and general public may increase • Product Approvals and Launches: GSK has got approval of launch of six products in USA and EU market. Recent Annual report of GSK shows a peerleading pipeline of 30 late stage assets. Ten new compounds and vaccines of GSK are in phase III clinical trials since the start of 2010. Having a number of new patents will generate cash for GSK to further invest in R&D and the new generic brand of GSK will give a tight competition to other pharmaceutical organizations • BITC Community Mark: GSK has become one of the first companies to be given the Community Mark by Business In The Community (BITC).GSK has been awarded this Community Mark because of its international initiatives, as well as its work at a local and national level within the UK. Through its Global Community Partnerships programs, GSK works with collaborating organisations to build strategic partnerships that generate mutual benefit for GSK, its partners and the beneficiaries of the programmes. Threats • • GSK is facing tough competition from the other pharmaceutical companies who market generic products against all of the major products of GSK. GlaxoSmithKline has been under significant pressure of late because of the New England Journal of Medicine showing greatly increased risks of a heart
•
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attack for diabetes patients that have taken AVANDIA, one of its most important drugs. This significantly reduced the sale of AVANDA. One of the most important threats that the GlaxoSmithKline is facing is the risk of the R&D. GSK invests about 14% of its sales in developing or researching new products. The outcome of not all the innovations, development processes or improvement planning is successful. New product initially may seem promising in development but, after huge investment of company's money, time and employees efforts, may fail to achieve desired results altogether or have only limited commercial success in terms of efficacy against disease or safety issues or drug reactions. Stringent regulatory environment: Drug regulatory authorities all over the world have increased regulatory concern on safety issues of drugs thus making it more difficult to gain approval for pharmaceutical products. Increasing pricing control: In some countries, major purchasers of pharmaceutical products involve directly in controlling the prices of pharmaceutical products as they have the economic power and choice of generic brands they use. This has a huge impact on the pricing control strategy of the company.
Strategies employed • As a part of the expansion of its innovation and high tech research capabilities, GSK entered into a long term strategic alliance with McLaren group. A strategic programme is currently being evaluated to apply McLaren’s engineering and technical expertise to GSK’s manufacturing processes. It is believed that the application of McLaren’s approach, technology and processes could lead to improvements in GSK’s production line performance, reducing the number of breakdowns and improving cost and customer service. McLaren’s expertise and technology could help drive improvements in clinical research processes by speeding up trial design and allowing for real time patient monitoring and treatment adjustment. GSK has implemented Price-Cutting Strategy in Emerging Markets. The price in those markets is below two-thirds of the price of the corresponding products in traditional Western markets. This price-cutting strategy will form the basis of GSK's emerging-market expansion. In addition to its price-cutting plans, GSK has outlined other key components of its emerging markets strategy. These include: Emerging Market Portfolio Expansion: GSK believes that providing a wider range of products in the emerging markets will enable the company to compete more effectively for government-procurement drug contracts. Central to this is the provision of off-patent brands acquired from other pharmaceutical companies. Local Manufacturing: Engaging in local manufacturing has enabled the company to control its costs, thereby allowing it to deliver the proposed price cuts. GSK's recent announcement of plans to manufacture its antiviral drug Relenza (zanamivir) in China in a move to improve access to the drug in the Chinese market is an example of this.
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Volume Cuts: GSK plans to sell small packs of its drugs in the emerging markets in order to improve accessibility. GSK has finalised to acquire Human Genome Sciences (HGS) for 3 billion USD. The deal allows GSK to take full control of Benlysta, its jointly owned drug for lupus, an auto-immune condition that causes swelling joints and rashes, as well as other experimental medicines including albiglutide for Type 2 diabetes and darapladib for cardio-vascular disease.
Competitor Analysis GSK competes with different firms for sales of different types of medication. GlaxoSmithKline’s biggest competitors include Pfizer (PFE), Novartis AG (NVS), Merck (MRK), and Schering-Plough (SGP). Competition in the pharmaceutical industry lies mostly in specific drug markets. Advair, one of GlaxoSmithKline's biggest drugs for asthma (see above) faces competition from AstraZeneca's 's Symbicort. Avandia, the diabetes drug faces competition from Merck (MRK)'s new oral diabetes drugs Januvia and Janumet. With the FDA's decision to require extra warnings on Avandia concerning heart failure, Merck (MRK) may be able to expand its portion of the type 2 diabetes market. GSK’s toughest competition comes from generic drug makers. GSK and Merck are fiercely competing over treatment for HPV. Merck’s Gardasil has been approved for sale by the FDA and is expected to reach $1 billion in sales. GSK is trying to create a cheaper HPV vaccine with Cervarix.
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