Gsk Report by Kashan Pirzada

IMPACT OF ECONOMY DOWNSLIDE ON GLAXOSMITHKLINE

SUBMITTED TO

Mr. KASHAN PIRZADA

BY

AGHA KHAWAR ALIMBA-4C

6148

30TH DEC. 08

International Business Analysis

http://www.gsk.com.pk/Index.html

TABLE OF CONTENTS


ACKNOWLEDGEMENT

I, Agha Khawar Ali, am thankful to Almighty Allah whose Grace made it possible for me in the accomplishment of this report.

I am also thankful to our International Business Analysis course instructor, Mr. Kashan Pirzada, who made this course an enjoyable journey of learning and experience and also guided me in this project throughout. Without his help, it would have been impossible for me to work on this project as well as to develop the basic understanding of the course.


TOPICS

LETTER OF AUTHORIZATION

A LETTER OF TRANSMITTAL

AN INTRODUCTION

AN EXECUTIVE SUMMARY

GLOBAL OVERVIEW GSK Background and Information GSK- The Company GSK at a Glance Company’s Management Company’s Strategy Company’s Commitment to Diversity Corporate Governance Company’s Products

IMPACT OF GLOBAL ECONOMIC CONDITIONS GSK Job Cuts Hits Chemists GSK Results Better Than Expected GSK Benefits from Weak Sterling GSK To Cut Back U.S. Sales force Glaxo Profit Drops

GSK PAKISTAN Pakistan Overview GSK Mission Statement GSK’s Products

PAKISTAN’S ECONOMY AND GSK ACTIVITIES GSK Buy Pakistani Business GSK Financial Performance and Future Outlook Financial Performance (2000-2007) Future Outlook GSK biological pumps more money into Pakistan GSK- Pakistan Economy and Market

GSK A WINNER FROM THE TOP TO DOWN



THE CONCLUSION

RECOMMENDATIONS

BIBLIOGRAPHY


LETTER OF AUTHORIZATIONLETTER OF AUTHORIZATION

I, Kashan pirzada, authorize Agha Khawar Ali, to

prepare a formal report on ‘GSK Pharmaceutical

Company’ and its macro and micro environment

and the impact that recession has on the

company.

It is needed that the report should entail details

regarding the current global crisis and how GSK

is coping up with that situation and minimizing

its effects.

It is hoped that the report will definitely help

them to understand how the impact is affecting

the company and how the company is dealing

with this situation.

Kashan Pirzada

Course Instructor (International Business

Analysis)

Bahria University

Karachi.



LETTER OF TRANSMITTALLETTER OF TRANSMITTAL

Dec 30th, 08

Mr. Kashan Pirzada

Lecturer,

International Business Analysis,

Bahria University, Karachi.

Dear Sir:

Report on “Impact of Economy Downslide on GSK” has been prepared as part of the “International Business Analysis” course requirement as & when desired by you. It’s a descriptive report about the impact that recession and global oil crisis have on GSK and how the company is going about in this situation.

I have tried to make it as informatory as possible for the average reader, keeping in view the time constraints and limitations of the knowledge I have gained so far. I have tried to mention all the factors that have contributed to the losses of this particular company.

In this report I have discussed the effects of recession on GSK, it also discusses the steps taken. It is hoped that the reader will find this report interesting as well as informative and any deficiencies observed in this report would be overviewed with due leverage for inexperience on part of the students in writing a report of such kind for the first time.

CordiallyAgha Khawar Ali


AN INTRODUCTION

The report is about the study that has been made to understand the activities and workings of a company in this turbulent era of world economies. For this the topic that has been chosen is;

“THE EFFECT TO AN ORGANIZATION IN PAKISTAN FOLLOWING THE DOWN SLIDE IN WORLD ECONOMIES LEADING TO THE DISASTEROUS IMPACT ON THE ECONOMY OF PAKISTAN.”

The topic has been suggested by the instructor in order to make it more possible for us to understand the variations in Pakistan economy and how the companies are changing their practices to confirm their existence in the market and remain competitive.

In this report it is also studies that what should a company must do to avoid bankruptcy by maintaining its profit or indeed try to maximize its profits in such economic conditions.

For this purpose, a company has been chosen from the pharmaceutical industry of Pakistan named as GLAXOSMITHKLINE-GSK.

The selection of this company is a result of a feedback that our instructor gave to the pharmaceutical industry of Pakistan as it is the only sector that has seen profits in such bad economic conditions.

It is therefore hoped that full justice has been done to the topic and it is wished that the report stand maximum to the instructor’s expectations.



EXECUTIVE SUMMARY

The company has a rich history that goes back to the early eighteenth century. GlaxoSmithKline formed through the merger of Glaxo Wellcome and SmithKline Beecham. It was announced in January 2000 that Glaxo Wellcome and SmithKline Beecham would merge to form GlaxoSmithKline, with the mission to improve the quality of human life by enabling people to do more, feel better and live longer. The new company began trading in January 2001.

The Company, GSK, have a challenging and inspiring mission: to improve the quality of human life by enabling people to do more, feel better and live longer. This mission gives them the purpose to develop innovative medicines and products that help millions of people around the world.

They produce medicines that treat six major disease areas – asthma, virus control, infections, mental health, diabetes and digestive conditions. In addition, they are a leader in the important area of vaccines and are developing new treatments for cancer.

The company is managed by the Board of Directors and the Corporate Executive Team.

They have set out three new strategic priorities that aim to increase growth, reduce risk and improve GSK’s long-term financial performance. 1. Grow a diversified global business. 2. Deliver more products of value. 3. Simplify GSK’s operating model.

The Board is responsible for their company's corporate governance and is ultimately accountable for their activities, strategy and financial performance. This tells us more about their decision making and the rules under which they operate. They are a public limited company incorporated on 6 December 1999.

The global economic conditions through out the year have a substantial effect on company’s operations.



GlaxoSmithKline is cutting the jobs of hundreds of scientists as it restructures its drug R&D operations. The job cuts represent around 2 per cent of the company's 17,000 global R&D workforce equating to around 350 jobs lost.

GlaxoSmithKline PLC, the world’s second-largest drug maker, had better-than-expected third-quarter results after the weak British pound helped outweigh the impact of increased generic competition in the United States.

Glaxo has been moving to diversify its business, with an emphasis on deals to bulk up its nonprescription health care business as the loyalty attached by customers to over-the-counter products mean companies can charge higher prices.

Glaxo which is second largest pharmaceutical company in the world by revenue has experienced a drop in its profits by 21.5% and therefore the company will not be buying back stocks in 2009.

GlaxoSmithKline Pakistan Limited was created on January 1st 2002 through the merger of SmithKline and French of Pakistan Limited, Beecham Pakistan (Private) Limited and Glaxo Wellcome (Pakistan) Limited- standing today as the largest pharmaceutical company in Pakistan.

GSK leads the industry in value, volume and prescription market shares. They are proud of their consistency and stability in sales, profits and growth. Some of their key brands include Augmentin, Panadol, Seretide, Betnovate, Zantac and Calpol in medicine and renowned consumer healthcare brands include Horlicks, Aquafresh, Macleans and ENO.

Like many other countries of the world, Pakistan is also facing ups and downs in its economy. The current situation of Pakistan is not really appealing for foreign investments and healthy business activities of foreign companies working in Pakistan.

But GSK anyhow, has maintained its activities and indeed has tried to expand its operations in Pakistan. It is the only company in Pakistan that has constantly experienced profits from Pakistani markets, infact the whole pharmaceutical industry has experienced the same. Let us now look at different developments and activities of GSK in Pakistan.



GlaxoSmithKline, continuing a small buying spree in emerging markets, has agreed to pick up Bristol-Myers Squibb's Pakistani business for about $36.5 million.

Once again it delivered sustained sales, profit and productivity growth despite increasing cost pressures from rising inflation and a significant increase in competition.

In these exceptional financial times, it is worth having an acute sense

for 'top down' priorities likely to drive share trading. This is not to decry

an obvious priority for investment value.

GlaxoSmithKline (GSK) is likely perceived as a winner here too, since

about 45% of group revenue is derived from the US. Some 32% of

revenue is from Europe as a whole and 23% 'rest of world' - so

GlaxoSmithKline is a useful means to diversify from the weakening UK

currency, and the economy if we suffer a relatively bad recession.



COMPANY BACKGROUND & INFORMATION

The company has a rich history that goes back to the early eighteenth century.

1700-1799

1715Plough Court pharmacy, the forerunner of Allen and Hanburys Ltd, is established in London by Silvanus Bevan.

1800-1849

1830John K Smith opens his first drugstore in Philadelphia. John's younger brother, George, joins him in 1841 to form John K Smith & Co.

1842Thomas Beecham launches the Beecham's Pills laxative business in England. The laxative is to become widely successful.



1850-1899

1859Beecham opens the world’s first factory to be built solely for making medicines at St Helens in England.

1865Mahlon Kline joins Smith and Shoemaker - as John K Smith and Co had become as a bookkeeper.

1873Joseph Nathan, who left the UK to seek new business opportunities 20 years before, establishes a general trading company at Wellington in New Zealand - Joseph Nathan and Co - the foundation for the Glaxo Company to be formed later.

1875Mahlon Kline took on additional responsibilities as a salesman and added many new and large accounts. He is rewarded when the company, Mahlon K Smith and company is renamed Smith, Kline and Company.

1880Burroughs Wellcome and Company is established in London by American pharmacists Henry Wellcome and Silas Burroughs; four years after Joseph Nathan opened a London office.

1884Tabloid is registered as a Burroughs Wellcome and company trade mark to describe its compressed tablets.



1885Thomas Beecham Company acquires headquarters on the corner of Silver Street and Water Street, St, Helens, England. Two years later, the company’s new factory in St Helens become the first in the area to have electricity.

1891Smith, Kline and Company acquires French, Richards and Company, providing a greater portfolio of consumer brand.

1900-1949

1902The Wellcome Tropical Research Laboratories open.

1904Nathan starts dried milk powder production in New Zealand, exporting to London. Henry Wellcome hires Henry Dale, who is to discover and study, among other things, histamine and how nerve impulses are transmitted.

1906Glaxo is registered by Joseph Nathan and Co as a trademark for dried milk. A Burroughs Wellcome subsidiary is created in New York.

1908The Glaxo department of Joseph Nathan and Co opens in London and the first "baby book" is published.

1910The "Blue Line" is added to the Smith, Kline and French name, a range including poison ivy lotion, iron tablets and lozenges.

1913Production of Beecham's Pills laxative reaches one million a day.



1919Alex C Maclean establishes Macleans Ltd, manufacturing own-name products for chemists. Mahlon Kline begins the novel practice of sending pharmaceutical samples through the mail to doctors across the US.

1924The vitamin D preparation Ostelin becomes Glaxo's first pharmaceutical product. The Wellcome Foundation Ltd is formed. The Beecham estate is purchased by Philip Hill, who realized that the Beecham's Pills business could, through diversification, become the basis of a major company.

1926Beecham's Powders cold remedy is introduced.

1929Smith, Kline and French Company are renamed Smith Kline and French Laboratories and become more focused on research.

1930 Sydney Smith of Wellcome isolates the glycosides of Digitalis lanata, a variety of foxglove. Lanoxin (digoxin) is used in the treatment of heart failure.

1935 Glaxo Laboratories is formed and new facilities are created at Greenford, near London.

1936 Sir Henry Wellcome's will leaves sole ownership of The Wellcome Foundation Ltd to a UK medical research charity, today called the Wellcome Trust. Sir Henry Dale of Wellcome is awarded the Nobel Prize for Medicine for his work in the chemical transmission of nerve impulses

1938Beecham acquires Macleans Ltd and Eno's Proprietaries Ltd. Macleans toothpaste and Lucozade energy-replacement drink are added to Beecham's product line

1939



Beecham acquires County Perfumery Co Ltd, manufacturers of Brylcreem, a men's hair application.

1943Beecham Research Laboratories is formed with the mission to focus exclusively on basic pharmaceutical research.

1945 Beecham Group Ltd is established, replacing Beecham Pills Ltd and Beecham Estates Ltd - later known as Beecham Group plc - and incorporates Beecham Research Laboratories.

1947 Glaxo Laboratories Ltd absorbs the Joseph Nathan company and becomes the parent company. Glaxo is listed on the London Stock Exchange. New Beecham laboratories are established at Brockham Park in Surrey, England.

1948 Vitamin B12 is isolated by Glaxo scientists for the treatment of pernicious anaemia. Streptomycin for TB treatment is produced by Glaxo scientists. Polymixin anti-bacterials are developed by Wellcome. Smith Kline and French Laboratories acquire a new site at 1530 Spring Garden Street, Philadelphia.

1949 Beecham Group Ltd acquires C L Bencard Ltd, a company specialising in allergy vaccines. It is a first step towards ethical products for the Beecham Company.

1950-1999

1950Thorazine (chlorpromazine), an anti-psychotic from Smith Kline and French, is introduced. The product will revolutionize the treatment of



mental illness during the 1950s and become the product of reference in the first generation of central nervous system drugs.

1952Smith Kline and French introduces the first time-released medicine, Dexedrine (dextroamphetamine sulfate). It is marketed and used in a Spansule - a novel form of drug delivery. Daraprim (pyrimethamine) anti-malarial is developed by Wellcome.

1953Wellcome launches its antileukaemic drug Purinethol (mercaptopurine).

1958Glaxo acquires Allen and Hanburys Ltd.

1959The Wellcome Foundation acquires Cooper, McDougall and Robertson Ltd, an animal health company founded in 1843.

1960Smith Kline and French launches Contac, the cold remedy, using the Spansule to release an initial major therapeutic dose, followed by numerous smaller doses, over 10-12 hours. The company moves into the animal health business with the acquisition of Norden Laboratories.

1963Betnovate (betamethasone) becomes the first of Glaxo's range of steroid skin disease treatments. In the mid-1960s, Smith Kline and French acquires RIT (Recherche et Industrie Therapeutiques), a vaccines business.

1968Septrin (co-trimoxazole) anti-bacterial from Wellcome is introduced.

1969Glaxo launches Ventolin (salbutamol) for asthma, developed at Ware and marketed under the Allen and Hanburys name. Ceporex, Glaxo's first oral cephalosporin antibiotic, is introduced. Smith Kline and French enters the clinical laboratories business through the purchase of seven laboratories in the US and one in Canada.

1970



Burroughs Wellcome Inc moves its production facility from New York to Greenville, North Carolina.

1971Wellcome launches its rubella vaccine. Burroughs Wellcome Inc opens its research site at Research Triangle Park, North Carolina.

1972Scientists at Beecham Research Laboratories discover amoxicillin and launch Amoxil, to become a widely-used antibiotic. Beecham Group plc is unsuccessful in its bid for Glaxo Group Ltd - and Glaxo is unsuccessful in its attempt to merge with UK chemists Boots. Inhaled steroid beclomethasone dipropionate is launched by Glaxo as Becotide (beclomethasone dipropionate) for asthma, followed in 1975 by Beconase for rhinitis conditions.

1976The H2 blocker Tagamet (cimetidine) is introduced in the UK by the SmithKline Corporation, and in the US in the following year. The treatment will revolutionise peptic ulcer therapy.

1978Through the acquisition of Meyer Laboratories Inc, Glaxo's business in the US is started, to become Glaxo Inc from 1980. The broad-spectrum injectable antibiotic Zinacef (cefuroxime) is introduced by Glaxo.

1981The anti-ulcer treatment Zantac (ranitidine) is launched by Glaxo and is to become the world's top-selling medicine by 1986. Augmentin (amoxicillin / clavulanate potassium), to combat a wide range of bacterial infections in children and adults, is launched by Beecham. The antiviral Zovirax (aciclovir) is launched by Wellcome for herpes infections

1982SmithKline acquires Allergan, an eye and skincare business, and merges with Beckman Instruments Inc, a company specialising in diagnostics and measurement instruments and supplies. The company is renamed SmithKline Beckman. John Vane of the Wellcome Research Laboratories is awarded the Nobel Prize, with two other scientists, "for their discoveries concerning prostaglandins and related biologically active substances."

1983Glaxo Inc moves to new facilities in Research Triangle Park and Zebulon, North Carolina. The broad-spectrum injectable antibiotic



Fortum (ceftazidime) is launched. Wellcome launches Flolan (epoprostenol) for use in renal dialysis.

1986Beecham acquires the US firm Norcliff Thayer, adding Tums antacid tablets and Oxy skin care to its portfolio.

1987The AIDS treatment Retrovir (zidovudine) is launched by Wellcome. Glaxo introduces the oral antibiotic Zinnat (cefuroxime axetil).

1988SmithKline BioScience Laboratories acquires one of its largest competitors, International Clinical Laboratories, Inc, increasing the company's size by half and establishing SmithKline BioScience Laboratories as the industry leader. The Nobel Prize for medicine is awarded to George Hitchings and Gertrude Elion, of Burroughs Wellcome Inc, and to Sir James Black, who had worked at the Wellcome Foundation and Smith Kline and French Laboratories, "for their discoveries of important principles for drug treatment."

1989SmithKline Beckman and The Beecham Group plc merge to form SmithKline Beecham plc. Engerix-B hepatitis B vaccine (recombinant), a genetically engineered hepatitis B vaccine, is launched in the US and France.

1990The synthetic lung surfactant Exosurf and the anti-epileptic drug Lamictal (lamotrigine) are launched by Wellcome. Glaxo introduces long-acting Serevent (salmeterol) for asthma, the inhaled corticosteroid Flixotide (fluticasone propionate) and Zofran (ondansetron) anti-emetic for cancer patients.

1991Glaxo launches its novel treatment for migraine, Imigran (sumatriptan), Lacipil (lacidipine) for high blood pressure, and Cutivate (fluticasone propionate) in the US for skin diseases. SmithKline Beecham moves its global headquarters to New Horizons Court at Brentford, England. SmithKline Beecham's Seroxat/Paxil (paroxetine hydrochloride) is launched in the UK, its first market.

1992



Mepron (atovaquone) for AIDS-related pneumonia is introduced by Burroughs Wellcome in the US. SmithKline Beecham's Havrix hepatitis A vaccine, inactivated, the world's first hepatitis A vaccine, is launched in six European markets.

1993SmithKline Beecham and Human Genome Science negotiate a multi-million-dollar research collaboration agreement for identifying and describing the functions of the genes in the human body. Glaxo introduces Flixotide (fluticasone propionate) for bronchial conditions.

1994SmithKline Beecham purchases Diversified Pharmaceutical Services, Inc, a pharmaceutical benefits manager. Sterling Health also is acquired, making SmithKline Beecham the third-largest over-the-counter medicines company in the world and number one in Europe and the international markets. With the intention of focusing on human healthcare, SmithKline Beecham sells its animal health business.

1995Glaxo and Wellcome merge to form Glaxo Wellcome. Glaxo Wellcome acquires California-based Affymax, a leader in the field of combinatorial chemistry. The Queen opens Glaxo Wellcome's Medicines Research Centre at Stevenage in England. Valtrex (valaciclovir) is launched by Glaxo Wellcome as an anti-herpes successor to Zovirax (acyclovir). SmithKline Beecham acquires Sterling Winthrop's site in Upper Providence, Pennsylvania, to fulfil US R&D expansion needs.

1996Community Partnership is established by SmithKline Beecham to focus philanthropy on community-based healthcare. SmithKline Beecham Healthcare Services is formed by combining the clinical laboratories, disease management and Diversified Pharmaceutical Services businesses.

1997SmithKline Beecham's research centre, New Frontiers Science Park, opens at Harlow in England. SmithKline Beecham and Incyte Pharmaceuticals create a joint venture - diaDexus - to discover and market novel molecular diagnostics based on the use of genomics.

1998



SmithKline Beecham and the World Health Organization announce a collaboration to eliminate lymphatic filariasis (elephantiasis) by the year 2020. The largest pharmaceutical company in Poland is created with the acquisition of Polfa Poznan by Glaxo Wellcome.

1999The 30th anniversary of the launch of Ventolin (albuterol) is marked as respiratory becomes Glaxo Wellcome's largest therapeutic area. Sharpening its focus on pharmaceuticals and consumer healthcare, SmithKline Beecham divests SmithKline Beecham Clinical Laboratories and Diversified Pharmaceutical Services. SmithKline Beecham's Avandia (rosiglitazone maleate), for the treatment of type 2 diabetes, is launched in the US.

2000+

2001GlaxoSmithKline formed through the merger of Glaxo Wellcome and SmithKline Beecham.It was announced in January 2000 that Glaxo Wellcome and SmithKline Beecham would merge to form GlaxoSmithKline, with the mission to improve the quality of human life by enabling people to do more, feel better and live longer. The new company began trading in January 2001.



THE COMPANY-GSK

The Company, GSK, have a challenging and inspiring mission: to improve the quality of human life by enabling people to do more, feel better and live longer. This mission gives them the purpose to develop innovative medicines and products that help millions of people around the world.

They are one of the few pharmaceutical companies researching both medicines and vaccines for the World Health Organization’s three priority diseases – HIV/AIDS, tuberculosis and malaria, and are very proud to have developed some of the leading global medicines in these fields.

Headquartered in the UK and with operations based in the US, they are one of the industry leaders, with an estimated seven per cent of the world's pharmaceutical market.

But being a leader brings responsibility. This means that they care about the impact that they have on the people and places touched by their mission to improve health around the world.

It also means that they must help developing countries where debilitating disease affects millions of people and access to life-changing medicines and vaccines is a problem. To meet this challenge, they are committed to providing discounted medicines where they are needed the most.

As a company with a firm foundation in science, they have a flair for research and a track record of turning that research into powerful, marketable drugs. Every hour they spend more than £300,000 (US$562,000) to find new medicines.

They produce medicines that treat six major disease areas – asthma, virus control, infections, mental health, diabetes and digestive conditions. In addition, they are a leader in the important area of vaccines and are developing new treatments for cancer.



GSK AT A GLANCE

GSK is a huge company and its operations are spread globally. Getting complete information about such a big company is not really possible, but somehow, the following points give us the idea of the company and help us to understand it a bit in a glance.

1. Their mission is to improve the quality of human life by enabling people to do more, feel better and live longer.

2. They are the research based pharmaceutical company.

3. They are committed to tackling the three "priority" diseases identified by the World Health Organization: HIV/AIDS, tuberculosis and malaria.

4. Their business employs around 100,000 people in over 100 countries.

5. They make almost four billion packs of medicines and healthcare products every year.

6. Over 15,000 people work in their research teams to discover new medicines.

7. They screen about 65 million compounds every year in their search for new medicines.

8. They supply one quarter of the world's vaccines and by the end of February 2008 they had 24 vaccines in clinical development.

9. January 2008 marked the tenth anniversary of their programme to help eliminate lymphatic filariasis (elephantiasis). During those ten years they donated 750 million albendazole tablets, reaching over 130 million people.

10. In 2007 they marked 15 years of our Positive Action programme that helps communities living with HIV/AIDS.

11. In the developing world, they provide certain medicines at preferential prices ensuring that the porrest can still benefit from their treatments and vaccines.



12. In 2007, their total community investment was valued at £282 million, equivalent to 3.8 per cent of Group total profit before tax.

13. Many of their consumer brands are household names: Ribena, Horlicks, Lucozade, Aquafresh, Sensodyne, Panadol, Tums, Zovirax.

GSK MANAGEMENT

The company is managed by the Board of Directors and the Corporate Executive Team.

The Board is comprised of executive and non-executive directors who are responsible for their corporate governance and ultimately accountable for their activities, strategy and performance.

The Chief Executive Officer (CEO) is responsible for the management of the business and is assisted by the Corporate Executive Team that manages their activities. Each member is responsible for a specific part of the business.



COMPANY’S STRATEGY

They have set out three new strategic priorities that aim to increase growth, reduce risk and improve GSK’s long-term financial performance:

1. Grow a diversified global business.

GSK will seek to generate future sales growth through supplementing strength in the core small-molecule pharmaceuticals business, with new investments in fast growing areas such as vaccines and consumer healthcare and new growth areas such as biopharmaceuticals. At the same time, they are actively seeking to unlock the geographic potential of their different businesses, particularly in emerging economies.

These businesses offer significant growth opportunities to GSK through new products and geographic expansion. Moreover, with increasing global trends to preventative healthcare and self medication, GSK can be a global leader in meeting the needs of customers.

GSK has an opportunity to expand its business in Emerging Markets and Asia Pacific. Economic improvements are driving the need and use of advanced vaccines and investments in capacity and regulatory expertise in these countries was an immediate priority for the company.

There was a deep seam of opportunity inside and outside of GSK’s current product portfolio. There are some elements of GSK’s new strategy to accelerate growth in Emerging Markets, emphasizing the company’s new business model and its transformational agreement with Aspen. This collaboration provides GSK with priority access to a portfolio of 1200 potential new products, specific to Emerging Market needs, and is a clear signal of the company’s intent to broaden its brand portfolio in these markets.



GSK also has a strong launch pipeline in Japan, with more than 25 product opportunities either registered or to be filed with regulators over the next two years.

Their strong focus on product development in Japan means that they will be in the enviable position of launching products from three eras of drug discovery into the Japanese market over the next few years.

Regarding other activities to maximize the value of GSK’s product portfolio, the company has begun to divest non-core product assets to ensure that commercial efforts are focused on delivering sales growth.

The crux is that by diversifying and globalizing GSK’s business the company would be less reliant on a small concentration of products, and will be able to improve sales growth with significantly reduced overall risk.

2. Deliver more products of value.

The core of GSK has always been and will remain pharmaceutical R&D. They are relentless in their efforts to improve R&D productivity and this is why they have started to implement a new vision for their R&D organization which is science-led and focused on value creation.

GSK is now focused around 8 research areas: Immuno-Inflammation, Neuroscience, Metabolic Pathways, Oncology, Respiratory, Infectious Disease, Ophthalmology and Biopharmaceuticals.

They believe that drug discovery is best optimized through research by small, focused teams. Building on the success of their team they have now pushed their organizational design further to increase product flow and value.

For the first time, GSK described the efforts of a new global Drug Discovery Investment Board, which is tasked to ensure that investment capital is allocated in a disciplined way to competing research teams.

The company is also seeking to explore opportunities to create shareholder value with the establishment of a new, global Corporate Venture Fund. This Fund will invest in start-up companies based on GSK-generated assets and intellectual property; and in early-stage companies that are using advanced technology outside of GSK to develop innovative healthcare products.



Together with this increased focus on capital allocation, GSK has begun to consult with payers at an early stage of clinical development to ensure that drug targets are consistent with payer needs.

In conclusion, GSK’s drug discovery efforts now revolve around the scientist, the patient, the shareholder and the payer. Input from all these constituents will drive their decision-making and enable GSK to address the realities of today’s environment for drug discovery.

3. Simplify GSK’s operating model.

To meet the demands of their future environment and support GSK’s first two strategic priorities, it is clear that they must create a new operating model for GSK and simplify our organization.

GSK has commenced a series of activities to improve the efficiency of its operations, including further efforts to improve GSK’s selling model and its manufacturing. A project has also started within the company to generate substantial working capital savings.

They are seeking to release value and improve GSK’s efficiency in a different way. Traditionally, they have focused on delivering cost savings through their business functions. Now, they are also adopting a pan-business approach to cost saving opportunities by making cross-business processes and structures simpler and more cost-efficient.

COMPANY’S COMMITMENT TO DIVERSITY

Understanding the role of diversity within their company means that they need to be aware of the contribution that can be made by everyone with whom they do business. This includes their employees, customers and other stakeholders.

For employees, they must create an environment that allows them to do their best work by being themselves.

For customers, it means understanding and responding to their often changing needs.

For other stakeholders, they must provide the right information in a timely and effective way.



By encouraging diversity:

They can recruit and retain the best people.

They can respond to their customers' needs in a way that builds their confidence in company and its products.

They can work effectively with other organizations.

CORPORATE GOVERNANCE

The Board is responsible for their company's corporate governance and is ultimately accountable for their activities, strategy and financial performance. This tells us more about their decision making and the rules under which they operate. They are a public limited company incorporated on 6 December 1999.

The company’s constitution is set out in its Memorandum and Articles of Association.

On 27 December 2000 they acquired Glaxo Wellcome plc and SmithKline Beecham plc, by way of a scheme of arrangement. The company, its subsidiary and associated undertakings, are a major global healthcare group that creates, discovers, develops, manufactures and markets pharmaceutical and consumer health products.

The company's Ordinary shares of 25p each are listed on the London Stock Exchange (ticker symbol GSK) and as American Depositary Shares (ADSs), representing two Ordinary shares, on the New York Stock Exchange (ticker symbol GSK).

COMPANY’S PRODUCTS

The company has a large long list of products that are used by its consumer’s world wide. Some of its products are listed below.

The Company's products include:

Advair Albenza

Alli



Amerge

Amoxil

Aquafresh

Arixtra

Arranon

Augmentin

Avandia

Avodart

Beano (dietary supplement)

Beconase

Boniva

Boost (health food)

Ceftin

Coreg

Flonase

Geritol

Goody's Powder

Horlicks

Imitrex

Lamictal

Lanoxin

Levitra

Lucozade



Macleans

Nicoderm

Panadol

Panadol night

Parnate

Paxil

Promacta

Ralgex

Relenza

Requip

Ribena

Sensodyne

Serlipet

SKF 38393

SKF 82958

Tagamet

Treximet

Trizivir

Tykerb

Valtrex

Veramyst

Vesicare

Wellbutrin



Zantac

Zofran

Zovirax

IMPACT OF GLOBAL ECONOMYThe global economic conditions through out the year have a substantial effect on company’s operations. Some information has been gathered to understand the impact of down sliding of global economy at GSK’s activities.

GSK job cuts hit chemistsGlaxoSmithKline is cutting the jobs of hundreds of scientists as it restructures its drug R&D operations. The job cuts represent around 2 per cent of the company's 17,000 global R&D workforce equating to around 350 jobs lost.

They continue to reshape their R&D operations to take advantage of new scientific opportunities and improve GSK's productivity. The company says that some job reductions are necessary and they will do everything they can to support those employees who are affected.

These changes are part of GSK's longer term strategy to ensure they invest in key areas of future growth and evolve their business to compete effectively in what is a rapidly changing and challenging environment for pharmaceutical companies.

The cuts are just the latest to hit chemists in the pharmaceutical industry. GSK has a belief that at one time there were a limited number of places in the world you could carry out R&D, but this is no longer the case - countries like China, India and Singapore now offer well qualified scientists, and often a more welcoming regulatory environment.

In addition, the slowing global economy doesn't encourage investment into research. In this market, people tend not to think of long-term, visionary products - they want projects that will deliver on a one to two year basis.



As well the general market difficulties facing all pharmaceutical firms, GSK is currently suffering from the loss of sales of blockbuster diabetes drug Avandia. Sales of the drug fell to £1.2 billion in 2007 - 26 per cent below 2006 sales - after analysis of the drugs safety data linked it with increased risk of heart attack. Sales continue to slide, falling 56 per cent to £191 million in the first quarter of 2008.

Before the cuts were announced, GSK's management told that research teams will be divided into smaller, focussed groups that would concentrate on a single disease area. The restructure is intended to stimulate innovation - and such groups would be rewarded based on the value they create for the company, with disincentives for destroying value.

Despite the cuts, there is still strong demand in the UK for good chemists and GSK wants them to be innovative and creative in their thinking and approach to the job. There are still huge opportunities for organic and inorganic chemists across the economy, and will be for some time. Chemists will have to be creative about finding jobs, both in terms of the industry and geography.

GSK’S RESULT BETTER THAN EXPECTEDGlaxoSmithKline PLC, the world’s second-largest drug maker, had better-than-expected third-quarter results after the weak British pound helped outweigh the impact of increased generic competition in the United States.

The company is also alert to potential acquisition opportunities as the economic market conditions have led some businesses to sell off assets. However the company has experienced no significant effect itself from a downturn in world economies.

Glaxo’s net profit dipped 1.8 percent to 1.29 billion pounds (US$2.1 billion) in the three months ending Sept. 30 from 1.31 billion pounds in the same period a year ago.

However, revenue jumped 7 percent to 5.88 billion pounds (US$9.6 billion) from 5.48 billion pounds, while earnings per share beat analyst expectations with a 6 percent rise to 25.2 pence (41 cents U.S.) from 23.7 pence.

The weak British pound played a large part in the increases -- in constant exchange rate terms, revenue fell 3 percent and EPS dropped 9 percent.



The company maintained its full-year forecast of a mid-single digit decline in earnings per share in local currencies.

Glaxo has been moving to diversify its business, with an emphasis on deals to bulk up its nonprescription health care business as the loyalty attached by customers to over-the-counter products mean companies can charge higher prices.

In its latest acquisition to boost its consumer health care business, Glaxo bought leading dry-mouth treatment Biotene for $170 million.

GSK BENEFITS FROM WEAK STERLING

Drugs group GSK experienced third quarter results benefit from the weak sterling. The group said earnings per share (EPS) rose 6% to 25.2p in sterling terms on turnover that increased 7% to £5.8bn. On constant currency terms, EPS fell 9% and turnover slipped 3%.

Third quarter dividend increased 8% to 14p. It completed share repurchases of £3.3bn in the 9 months to 30th September 2008 but it does not expect to make significant share repurchases in 2009.

GSK CUT BACK US SALES FORCE

GlaxoSmithKline PLC is restructuring its U.S. operations, starting with reducing its U.S. sales force by 1,000, following the lead of many of its top competitors in eliminating sales jobs. The world's No. 2 drug maker by revenue also will switch from having dual U.S. headquarters, in Philadelphia and in Research Triangle Park, N.C., to operating just the North Carolina headquarters. U.S.-traded shares of GlaxoSmithKline fell $3.23, or 8 percent, to close at $36.96

The company says that Crude oil prices drop more than $5 a barrel. Oil prices dipped below $66 a barrel. Investor focus is likely to shift to the growing global economic malaise and its potential impact on energy demand. Also the company has indications that OPEC was following through on an earlier pledge to pull 1.5 million barrels of crude a day from the market failed to support prices. Light, sweet crude for December delivery fell $5.23 to $65.30 a barrel on the New York



Mercantile Exchange. Gasoline prices fell again overnight, dipping a couple of cents to a national average of $2.365 for a gallon of regular unleaded. Twin Cities gas prices dropped 2.4 cents to an average of $2.033.

GLAXO PROFITS DROPS

Glaxo which is second largest pharmaceutical company in the world by revenue said that it has experienced a drop in its profits by 21.5% and therefore the company will not be buying back stocks in 2009.

GSK PAKISTAN

GSK PAKISTAN OVERVIEW

GlaxoSmithKline Pakistan Limited was created on January 1st 2002 through the merger of SmithKline and French of Pakistan Limited, Beecham Pakistan (Private) Limited and Glaxo Wellcome (Pakistan) Limited- standing today as the largest pharmaceutical company in Pakistan

As a leading international pharmaceutical company they make a real difference to global healthcare and specifically to the developing world. They believe this is both an ethical imperative and key to business success. Companies that respond sensitively and with commitment by changing their business practices to address such challenges will be the leaders of the future. GSK Pakistan operates mainly in two industry segments: Pharmaceuticals (prescription drugs and vaccines) and consumer healthcare (over-the-counter- medicines, oral care and nutritional care).

GSK leads the industry in value, volume and prescription market shares. They are proud of their consistency and stability in sales, profits and growth. Some of their key brands include Augmentin, Panadol, Seretide, Betnovate, Zantac and Calpol in medicine and



renowned consumer healthcare brands include Horlicks, Aquafresh, Macleans and ENO.

In addition, they are also deeply involved with their communities and undertake various Corporate Social Responsibility initiatives including working with the National Commission for Human Development (NCHD) for whom they were one of the largest corporate donors. They consider it their responsibility to nurture the environment they operate in and persevere to extend their support to our community in every possible way. GSK participates in year round charitable activities which include organizing medical camps, supporting welfare organizations and donating to/sponsoring various developmental concerns and hospitals. Furthermore, GSK maintains strong partnerships with non-government organizations such as Concern for Children, which is also extremely involved in the design, implementation and replication of models for the sustainable development of children with specific emphasis on primary healthcare and education.

The company’s head office in Pakistan is at:35- Dockyard Road, West Wharf, Karachi- 74000.Telephones: 2315478-82, 2316071-73 and 2315101-08Fax: 2314898 and 2311122

And other sites and locations of the company in other cities of Pakistan Are:

Karachi 35- Dockyard Road, West Wharf, Karachi- 74000.Telephones: 111-GSK-PAK (111-475-725)Fax: 2314898 and 2311122

94, Deh Landhi,Karachi.Telephones: 5015040-44Fax: 5015515

F/268, S.I.T.E,Near Labour Square,Karachi-75700



Telephones: 2599999 Fax: 2572613 and 2570360

B/63, Estate Avenue S.I.T.E,Karachi.Telephones: 2561200-7Fax: 2564797

Lahore19.5 km, Ferozepur Road,P.O.Box No. 244,Lahore.Telephones: 5811931-35Fax: 5820821

Cordeiro House,Plot No. 27, Kot Lakhpat Industrial Estate,Kot Lakhpat, LahoreTelephones: 5111061-64 and 5111066-69Fax: 5111065 and 5111067

GSK’s Mission Statement

“Excited by the constant search for innovation, we at GSK undertake our quest with the enthusiasm of entrepreneurs. We value performance achieved with integrity. We will attain success as a world class global leader with each and every one of our people contributing with passion and an unmatched sense of urgency.

Our mission is to improve the quality of human life by enabling people to do more, feel better and live longer.

Quality is at the heart of everything we do- from the discovery of a molecule to the development of a medicine.”

GSK PRODUCTS

The company’s leading products in Pakistan are:

Augmentin, Amoxil, Panadol, Ventolin Ampiclox, Betnovate, Calpol, Zantac and Septran.

The company’s vaccines products include:



Engerix, Typherix, Infanrix, Mencevax, Fluarix, Havrix, Varilrix, Hiberix, Tritanrix and Priorix.

PAKISTAN’S ECONOMY AND GSK ACTIVITIES

Like many other countries of the world, Pakistan is also facing ups and downs in its economy. The current situation of Pakistan is not really appealing for foreign investments and healthy business activities of foreign companies working in Pakistan.

But GSK anyhow, has maintained its activities and indeed has tried to expand its operations in Pakistan. Its is the only company in Pakistan that has constantly experienced profits from Pakistani markets, infact the whole pharmaceutical industry has experienced the same. Let us now look at different developments and activities of GSK in Pakistan.

GSK TO BUY PAKISTANI BUSINESS

GlaxoSmithKline, continuing a small buying spree in emerging markets, has agreed to pick up Bristol-Myers Squibb's Pakistani business for about $36.5 million.

Glaxo will acquire a portfolio of more than 30 pharmaceutical brands, including antibiotics, vitamins and dermatology products. Total sales of the portfolio in 2007 were about $19 million.

They are continuing to make investments in emerging markets to grow and diversify GSK’s business. GSK believes that this acquisition



reinforces their commitment to Pakistan, broadening their product portfolio and helping them to meet the needs of patients.

Glaxo, like many big pharmaceutical companies, faces a slowing pipeline of drugs from its R&D efforts as well as increased competition from generic drug makers. GSK is determined that it will increasingly look outside its own walls for growth.

That includes an emphasis on emerging markets. The relatively small deals GSK is making in the space won't have too much of an immediate impact, but the company says emerging markets will account for 40 percent of growth in the worldwide pharmaceutical industry by 2020.

Already this year, GSK has purchased a portfolio of drugs from Bristol-Myers Squibb in Egypt. The company also announced a drug commercialization deal with the South African pharmaceutical company Aspen. GlaxoSmithKline, which has headquarters in London, employs more than 5,000 people in the Triangle.

GSK FINANCIAL PERFORMANCE AND FUTURE OUTLOOK

The GSK leads the local industry in value, prescription and volume shares and a substantial size difference over its nearest competitor in the industry. It also exports good quality products, which make around 2% of its sales. Major export markets include Afghanistan, Sri Lanka, Syria and Greece. In FY07, the export business grew by 19.4% and amounted to Rs 256 million.

FINANCIAL PERFORMANCE (2000-2007)

Over the last four years, GlaxoSmithKline Pakistan Limited has performed strongly delivering consistent sales, profit and productivity growth from operational excellence. In FY06, GSK made history by becoming the first company in Pakistan's pharmaceutical industry, to cross Rs 10 billion sales mark. It continued its strong growth momentum in FY07.

Net sales for the year 2007 at Rs 10.6 billion, grew by 5.18% primarily due to volume growth, as prices have remained static since 2001. This sales growth was mainly led by strong performances in the vaccines, antiviral, central nervous system (CNS) and dermatology portfolios. Introduction of new products in recent years also contributed towards



the good sales growth. However, this robust sales growth was threatened by shortages in raw material supply due to import restrictions. The issues were later resolved and must positively impact the FY08 sales.

As clearly evident, the increasing trend of profit and gross profit margins was adversely affected in 2007, by the effect rising inflation on cost of materials and high fuel and energy costs. However, continual improvement in business processes and sustained investment in product promotion helped sustain the operational excellence and cost containment initiatives in manufacturing and commercial operations and procurement. Hence we see almost flat gross and net margins in FY07. The company foresees further erosion in its margins and overall profitability without price increase compensating for escalating costs.

Initially, the company had a relatively low ROA and ROE mainly due to a low EBIT and high interest costs due to high usage of the debt through the creditors. The lowest return can be seen in 2001 when the company's EBIT fell to an all time low due to a great amount of expenses and increased COGS along with high financial charges.

The company then recovered somewhat from the depression by an increase in its sales and a reduction in the COGS and administrative expenses, even the financial charges for 2002 were relatively lower than the previous years. An increasing trend can be seen 2002 onwards basically due to high EBIT. The company indeed has been earning higher and higher profits from sales and has greatly reduced its financial charges.

However like profit margins, ROA and ROE also showed a decline in 2006 due to higher expenses that can be attributed to high inflation and increase in fuel prices. The same trend continued in FY07.

The liquidity position shows an increasing trend till FY05. During the first three years, the company had a relatively low current ratio around 2.48, 2.53 and 2.83 showing that initially its liquidity position was relatively weak.

In 2000 and 2001 this increase in amount of current liabilities was basically due to creditors and accrued expenses whereas in 2002, the current liabilities had significantly increased due to the increase in dividends.



We can see a significant increase in the current ratio in 2003 (4.15). This improvement in liquidity position was due to a great increase in cash and cash balances with the current liabilities only being the short term loans. In later years, though the company has kept its inventory level high but balanced it by increasing its cash balances by a great extent and lowering its liabilities by divesting from creditors and the accrued expenses. However, in FY07 the current ratio at 4.3 was comparatively lower than the last 3 years because its current assets declined coupled with an increase in its current liabilities (mainly trade payables).

Quick ratio showing a better picture also followed CR trend and declining in FY07 on account of decreasing CA (mainly due to the reduced cash and equivalents for Capex and increased DPOs.)

The 2000 inventory turnover ratio and operating cycle show that the company was probably not generating enough business or as we have already determined, it was holding too much inventory.

A great change can be seen in 2001 as the inventory turnover ratio decreased by a huge amount. This was due to the major increase in sales and a relative decrease in inventories as compared to previous years.

In subsequent years to 2004 the inventory level has gone down relative to its cash and cash balances however, the company has increasing inventory turnover from 2005 onwards. This is mainly due to capital expenditure made on facility improvement and rationalization.

From the days sale outstanding we can see that initially it took the company around 21 days to collect its receivables. The company however very quickly reduced the average collection period by a great amount. This was in major due to a great increase in sales with a decrease in credit sales.

Even in subsequent years the company kept its credit sales low and increased its sales by a great amount each year with the average collection period being reduced to a mere 1 day in 2004 due to a great dip in the receivables in that year. In last two years it has increased to 2.48 and 3.02 respectively due to higher credit sales.

The operating cycle hence showed an increase in FY05, FY06 and FY07 due to rise in ITO and DSO in the respective years. One can also



witness flat operating cycles in FY05, FY06 and FY07, hovering around 79-81 days. One hopes that FY08's cycle deviates positively from the prevailing trend.

The total asset turnover of the company has shown a negative trend over the years. A slight variation can be seen in 2001 due to a slight reduction in total assets than in 2000 with an increase in the net sales.

This decline is due to the fact that the company has been investing in its fixed assets, mainly in plant, machinery and infrastructure up gradation. The capital expenditure of Rs 646 million was made in FY07 of which significant portion went to facility improvement and rationalization. This indicates that the increase in the number of sales was expected by the company and it took the necessary measures and invested in its total assets accordingly.

The sales/equity ratio also follows the same pattern as that of TATO. This is showing a declining trend in 2002 inwards because of increasing equity base of the company both due to increasing reserves and paid-up capital over the years. Both sales/equity and TATO ratios have plunged in FY07 mainly on account of increased assets base due to investments and capex.

Looking at GSK's debt management ratios one can say that the company even in its initial years had a relatively good financial standing.

Around 38% of the total financing came from creditors in FY00 implying that company's equity financed more than half of the total.

After 2001 the D/A ratios have significantly declined due to a great decrease in the company's total debt as opposed to the increase in its total assets over the years. This again confirms our finding that GSK is increasing its equity base.

During the first two years we can see that the D/E ratio remains practically the same though it is very high signifying that it is risky for current or future investors to invest in the company. FY 2001 shows a dramatic decrease in the ratio as the company's net profits increased by greater margins whereas it significantly decreased its liabilities. Similarly, the 2002 shows a major change in the debt to equity ratio as the sales increased resulting in higher and higher profits while the company divested from credit financing. However, both D/A and D/E



increased slightly in FY06 mainly because of higher trade payables which can be attributed to the high cost of doing business. Both these ratios remained flat in FY07 showing that GSK continues its trend of lower debt reliance.

Looking at the declining long term debt to equity ratio, we can see that a majority of the credit financing was short term throughout the years. During the initial years a majority of the current liabilities consisted of creditors and accrued expenses however, during the latter years continuing till FY07 it comprises of short term loans and trade payables, as the company has divested from accrued expenses and other creditors.

The falling debt ratio shows that the risk to a current or future investor in the company is decreasing. The company is becoming more financially stable and in a better position to borrow now and in the future, if the need arises.

Looking at GSK's T.I.E ratio we see a great variation throughout the years. During 2000 the TIE ratio was relatively high depicting that earnings were available to meet the interest payments. We can see a great reduction in the tie ratio in 2001 due to a major decrease in the earnings and a subsequent increase in the interest charges. Thus the company during this year was more vulnerable to increases in the interest payments.

In 2002 we again see an increase in the company's ability to pay off debts, due to an increase in EBIT because of a major increase in the net sales.

In 2001, 2002 and 2003 this ratio was relatively low compared to the subsequent years as the company was in credit with third parties and had accrued expenses along with dividends.

FY03 again shows the greatest deviation by far, as the company earned a lot more than interest payments that required to be paid. The interest payments in this year decreased significantly as the company divested from creditors and accrued expenses along with dividends and instead only had outstanding financial charges on trade payables.

During 2004 the TIE ratio again dipped due to a high amount of taxation along with trade payables. FY05 shows the highest tie ratio by far which is due to a significant rise in the EBIT because of greater net



sales as compared to prior year along with a reduction in the interest charges due to trade payables and taxation however, this huge jump in the tie ratio is because of the rise in net sales. However, in 2006 again TIE nose-dived because of rising interest rates due to SBP's tight monetary stance. But it recovered greatly in FY07, due better EBOT and lower finance costs.

The earnings per share for GSK are erratic. Initially in 2000 the EPS was high (11.29) due to a high net income and a relatively low amount of outstanding shares. In 2001 however there was a great decrease in the EPS (from 11.29 to 2.88) this was due to a great drop in the net income of GSK because of high COGS and administrative and other expenses while the total outstanding shares remained constant from the previous year. In subsequent years GSK has continually stabilized its EPS due to greater sales and a relative drop in expenses which have resulted in a higher net income. A dilution can be seen in FY07 EPS due to issuance of new shares.

Initially investors were willing to pay relatively little for a dollar of GSK's book value however during the recent years the company has turned into a financially strong setup. A major factor of the increase in this book value per share is the continuous increase in its equity base by mainly through issuance of new shares. Some dilution effect can be seen in FY07's BVS.

Despite significant capital expenditure over the years, the overall cash position of the company improved which is evident by the positive trend of DPS. Though it declined on a YoY basis, it has increased from Rs 5/share in FY01 to Rs 7.5 /share in FY07, showing the good return to shareholders as the primary objective of GSK.

The analysis of FY07 reveals a reduction of Rs 413 million in cash position compared to FY06, mainly on account of increased requirements for working capital and additional stocks required to covering the market requirements for the relocation period of the penicillin manufacturing to the new facility.

In 2000, we see that the price/earnings ratio was relatively low which can sometimes signify poor growth prospects. This was due to a high market price with relatively low EPS. This signified that the firm was risky for investing.



A sharp sudden shoot up is seen in 2001 due to a sharp decline in the EPS though there was a relative decline in the price per share. This could confuse investors as from the other ratios it can be seen that the company was not very profitable throughout this year however, the ratio shows that the firm has strong growth prospects.

In subsequent years, we can see that the firm has generally maintained an above average P/E ratio showing that it is less risky than other firms.

FUTURE OUTLOOK

Work on new state-of-the-art, penicillin facility was completed and its commercial production started in Q3 of FY07 as expected. This will provide higher quality, efficiency and flexibility in manufacturing operations of GSK largest products.

An area for particular focus for GSK is the area of preventive healthcare and vaccines. GSK being the world leading developer and manufacturer of vaccines, sees this as a great opportunity to add value to the healthcare situation in the country.

The FY08 is likely to be challenging, in particular for the pharmaceutical industry of Pakistan. The industry has great potential for growth, however its sustained success depends on a regulatory environment, which is able to balance the interests of the research-based industry, with the need for affordable healthcare.

The process of the pharmaceutical products have been static since 2001 and there has been no offset to account for the adverse impact of rising inflation (particularly in energy and fuel costs), raw and packaging material costs and devaluation.

The business improvement initiatives undertaken in the past few years by the GSK have contributed towards enhanced operational efficiencies and cost savings. However, this beneficial impact is eroding and will continue to do so unless the government implements the existing notified policy of allowing price adjustments to offset inflation and devaluation. This is essential if the industry is to sustain itself for future.

In recent few years, Pakistan has made some progress in updating its Intellectual Property Rights (IPR) laws to the levels required by global



conventions. Practically, much more needs to be done to discourage both piracy and counterfeiting. Its effective implementation will not only protect the consumers, but also the industry and result in quality and research-oriented culture. The GSK will also continue to focus on introducing innovative medicines developed through its global R&D effort.

GSK BIOLOGICAL PUMPS MORE MONEY INTO PAKISTAN

Glaxo Smith Kline (GSK) Biological, Belgium would be investing a big amount (700 million Pak Rupees) for expanding the existing four plants manufacturing base in Pakistan. The company said that their group intended to invest in the field of vaccine production in Pakistan on Private Partnership basis because the company believes that Pakistan has quite big market for the product. The company is also studying the potential of investing in dairy, gem and jewelry.

GSK- PAKISTAN ECONOMY AND MARKET

Pakistan's Pharmaceutical industry is a major sector of the national economy providing patients’ affordable access to quality medicines. The industry continued to grow, in line with GDP, with over 400 manufacturing and importing companies competing in a largely genericised market.

GlaxoSmithKline Pakistan Limited is the market leading company in terms of value, prescription and volume shares.

Once again it delivered sustained sales, profit and productivity growth despite increasing cost pressures from rising inflation and a significant increase in competition.

FINANCIAL PERFORMANCE

Net Sales Rs.9.4 billion Growth 6.2%



Profit after Tax Rs. 1.8 billion Grew by 23.3%

Sales per Employee Rs.5.1 million Grew by 6.2%

Earning Per Share Rs. 16.6 Grew by 23.2%

(Basic & Diluted)

Corporate Tax Charges Rs. 880.7 million Grew by 35.9%

GSK A WINNER FROM THE TOP TO DOWN



In these exceptional financial times, it is worth having an acute sense

for 'top down' priorities likely to drive share trading. This is not to decry

an obvious priority for investment value.

Given the severity of downturn emerging, as one aspect of portfolio

positioning, you need exposure to firms with a good element of

'essential products/services'. Pharmaceuticals, whilst not immune to

overall trends in consumer spending, are one example. Defence,

tobacco and drinks groups are others, but some investors may have

ethical concerns about such industries. At least pharmaceuticals tend

to be relatively 'clean'. If you are satisfied that animal experiments

have a proper role. Ethical issues will not limit all investors' actions but

they do play a role in setting market sentiment, so out of the various

'defensive' sectors pharmaceuticals may enjoy some preference.

Currency factors are a second key factor, with sterling weakening

sharply especially against the US dollar. GlaxoSmithKline (GSK) is likely

perceived as a winner here too, since about 45% of group revenue is

derived from the US. Some 32% of revenue is from Europe as a whole

and 23% 'rest of world' - so GlaxoSmithKline is a useful means to

diversify from the weakening UK currency, and the economy if we

suffer a relatively bad recession.

A third factor is investors prioritizing liquid shares in big companies

when the market rebounds after a crash. This is logical on

fundamentals too, since big companies tend to have cash flows robust

enough to withstand economic downturn although you need to pay

attention to capital structure - specifically, are they comfortable to

service debt? GlaxoSmithKline ticks the boxes in such respects.

The FTSE 100-listed shares have not been immune to the bear market,

falling from about £15 to £10 which appears to be a support level

visited last April and again just recently. Yet the price has shown itself

firm amid the latest savage phase of the bear market, rallying above



£11 as investors recognize virtues in GlaxoSmithKline's fundamentals

relative to other shares, for hard times ahead.

On a company specific level, a likely reason the shares tested a £10

low before the bear market turned nasty, was concern about various of

GlaxoSmithKline's mature brands meeting stiff competition in the US.

This was born out in a third quarter 2008 results update on 22

October, which cited "a significant impact on pharmaceutical sales,

although we continue to see good growth from other areas of the

pharmaceuticals portfolio... including the US... and growth in vaccines,

emerging markets and consumer healthcare.

This diversification in sales is an inherent strength for GSK and one

they are actively nurturing, through delivery and investment in their

new strategic priorities. Ultimately, they are aiming to create a more

balanced healthcare business with a lower overall risk profile. There

have been 10 new products launched so far in 2008.

This mixed performance meant third quarter earnings per share

slipped 9% at constant exchange rates although - and showing how the

exchange rate trend can be influential - it was up 6% in sterling terms.

During October, sterling has weakened significantly hence increasing

the attractions of GlaxoSmithKline's currency exposure profile.



THE CONCLUSION

The study of this report tells about the strategies and activities turns

and moves of the company that it has taken to set itself competent in

the world and Pakistan’s market in spite of such bad economic

recession.

To be successful the company has taken many steps where in some of

which it has decided to go for mergers and acquisitions and on the

other hand the company has decided to cut of its sales force in many

of its global regions.

The company has used the weakening of sterling as its strength and

therefore has emerged as a profitable organization through out the

world. In Pakistan also, GSK is the only company that has seen profits.

Therefore it is concluded here that the management of GSK is having

an eagle eye over the economic conditions locally and globally. The

company is proactive to economic crisis and hence it makes prior

adjustments to its activities.



RECOMMENDATIONS

1. Company should continue to invest in Research and Developments

in order to come up with new and innovative products.

2. GSK should close those of its plants that are not used by the

company for its operation and therefore giving the companies high

overhead costs.

3. The company should also keep a check to its activities more closely.

This will help the company to outset those of its activities that are only

giving costs to the company.

4. It has been seen in this report that the company has cut many of its

employees. Here the company must do something for those cut down

employees as they may protest against the company giving bad word

of mouth to the company.

5. Company should conduct most of its R&Ds in developing countries;

this would help in getting better skilled and low waged employees to

the company, provided that the company should not compromise on

its quality.

6. In order to gain market share, company can also reduce its products

prices. This would allow the consumers to buy more of its products and

would allow the retailers to have its product on their shelves.

7. Reduction in prices may lead to low profits but large market share.

Profits Company should cut down it over expenditures.

8. In Pakistan there is huge potential for the company to have profits.

R&D here in Pakistan would benefit both the company and the country.

9. By giving employment to the people of Pakistan, the company can

overcome the problem of recession in Pakistan and this way it can

have more profits because employment would reduce recession.



10. By acquiring Pakistani companies which are selling off their assets,

the company can also diversify its operations and have diversified

market share.

BIBLIOGRAPHY

1. www.yahoo.com

2. www.google.com

3. www.wikkipedia.com

4. www.gsk.com

5. www.gsk.com.pk

6. www.ask.com


http://www.ask.com/

http://www.gsk.com.pk/

http://www.gsk.com/

http://www.wikkipedia.com/

http://www.google.com/

http://www.yahoo.com/


Documents

Gsk Report by Kashan Pirzada