GSK Report by Kashan Pirzada

IMPACT OF ECONOMY DOWNSLIDE ON
GLAXOSMITHKLINE
SUBMITTED TO
Mr. KASHAN PIRZADA
BY
AGHA KHAWAR ALI

MBA-4C
6148
30TH DEC. 08
International Business Analysis

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

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.
TABLE OF CONTENTS

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 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 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.
Cordially
Agha 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
1715
Plough Court pharmacy, the forerunner of Allen and Hanburys Ltd, is
established in London by Silvanus Bevan.
1800-1849
1830
John K Smith opens his first drugstore in Philadelphia. John's younger
brother, George, joins him in 1841 to form John K Smith & Co.
1842
Thomas Beecham launches the Beecham's Pills laxative business in
England. The laxative is to become widely successful.

1850-1899
1859
Beecham opens the world’s first factory to be built solely for making
medicines at St Helens in England.
1865
Mahlon Kline joins Smith and Shoemaker - as John K Smith and Co had
become as a bookkeeper.
1873
Joseph 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.
1875
Mahlon 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.
1880
Burroughs Wellcome and Company is established in London by
American pharmacists Henry Wellcome and Silas Burroughs; four years
after Joseph Nathan opened a London office.
1884
Tabloid is registered as a Burroughs Wellcome and company trade
mark to describe its compressed tablets.
1885
Thomas 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.

1891
Smith, Kline and Company acquires French, Richards and Company,
providing a greater portfolio of consumer brand.
1900-1949
1902
The Wellcome Tropical Research Laboratories open.
1904
Nathan 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.
1906
Glaxo is registered by Joseph Nathan and Co as a trademark for dried
milk. A Burroughs Wellcome subsidiary is created in New York.
1908
The Glaxo department of Joseph Nathan and Co opens in London and
the first "baby book" is published.
1910
The "Blue Line" is added to the Smith, Kline and French name, a range
including poison ivy lotion, iron tablets and lozenges.
1913
Production of Beecham's Pills laxative reaches one million a day.
1919
Alex 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.

1924
The 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.
1926
Beecham's Powders cold remedy is introduced.
1929
Smith, 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
1938
Beecham 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.
1943

Beecham 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
1950
Thorazine (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.
1952
Smith 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.

1953
Wellcome launches its antileukaemic drug Purinethol
(mercaptopurine).
1958
Glaxo acquires Allen and Hanburys Ltd.
1959
The Wellcome Foundation acquires Cooper, McDougall and Robertson
Ltd, an animal health company founded in 1843.
1960
Smith 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.
1963
Betnovate (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.
1968
Septrin (co-trimoxazole) anti-bacterial from Wellcome is introduced.
1969
Glaxo 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.
1971
Wellcome launches its rubella vaccine. Burroughs Wellcome Inc opens
its research site at Research Triangle Park, North Carolina.
1972
Scientists 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.
1976
The 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.
1978
Through 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.
1981
The 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
1982
SmithKline 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."
1983
Glaxo 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.
1986
Beecham acquires the US firm Norcliff Thayer, adding Tums antacid
tablets and Oxy skin care to its portfolio.
1987

The AIDS treatment Retrovir (zidovudine) is launched by Wellcome.
Glaxo introduces the oral antibiotic Zinnat (cefuroxime axetil).
1988
SmithKline 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."
1989
SmithKline 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.
1990
The 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.
1991
Glaxo 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.
1993
SmithKline 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.
1994
SmithKline 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.
1995
Glaxo 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.
1996
Community 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.
1997
SmithKline 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.
1999
The 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+
2001
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
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
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 ECONOMY

The 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 chemists

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.
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 EXPECTED

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.
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 2315101-08
Fax: 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: 5015040-44
Fax: 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.
Fax: 2564797
Lahore
19.5 km, Ferozepur Road,
P.O.Box No. 244,
Lahore.
Fax: 5820821
Cordeiro House,
Plot No. 27, Kot Lakhpat Industrial Estate,
Kot Lakhpat, Lahore
Telephones: 5111061-64 and 5111066-69
Fax: 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

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IMPACT OF ECONOMY DOWNSLIDE ON

Mr. KASHAN PIRZADA

AGHA KHAWAR ALI

International Business Analysis

I, Agha Khawar Ali, am thankful to

I am also thankful to our

International Business Analysis

 IMPACT OF GLOBAL ECONOMIC CONDITIONS

 PAKISTAN’S ECONOMY AND GSK

International Business Analysis

 GSK A WINNER FROM THE TOP TO DOWN

International Business Analysis

I, Kashan pirzada, authorize Agha Khawar Ali, to

It is needed that the report should entail details

is coping up with that situation and minimizing

International Business Analysis

Report on “Impact of Economy Downslide on GSK” has been

I have tried to make it as informatory as possible for the

In this report I have discussed the effects of recession on

International Business Analysis

“THE EFFECT TO AN ORGANIZATION IN PAKISTAN FOLLOWING

The topic has been suggested by the instructor in order to make it

In this report it is also studies that what should a company must do to

The selection of this company is a result of a feedback that our

International Business Analysis

The Company, GSK, have a challenging and inspiring mission: to

The company is managed by the Board of Directors and the Corporate

The Board is responsible for their company's corporate governance and

The global economic conditions through out the year have a

GlaxoSmithKline is cutting the jobs of hundreds of scientists as it

GlaxoSmithKline PLC, the world’s second-largest drug maker, had

International Business Analysis

Glaxo has been moving to diversify its business, with an emphasis on

Glaxo which is second largest pharmaceutical company in the world by

GlaxoSmithKline Pakistan Limited was created on January 1st 2002

GSK leads the industry in value, volume and prescription market

GlaxoSmithKline, continuing a small buying spree in emerging markets,

Once again it delivered sustained sales, profit and productivity growth

International Business Analysis

COMPANY BACKGROUND & INFORMATION

International Business Analysis

International Business Analysis

International Business Analysis

International Business Analysis

International Business Analysis

International Business Analysis

International Business Analysis

International Business Analysis

International Business Analysis

International Business Analysis

International Business Analysis

They are one of the few pharmaceutical companies researching both

It also means that they must help developing countries where

As a company with a firm foundation in science, they have a flair for

International Business Analysis

1. Their mission is to improve the quality of human life by enabling

2. They are the research based pharmaceutical company.