Name of the Company: GlaxoSmithKline Plc
Business Sector: Pharmaceutics
Operating Geography: Europe, United Kingdom, Global
About the Company: GlaxoSmithKline is a British pharmaceutical company headquartered in Brentford, UK. GSK has three major businesses namely pharmaceutical medicines, vaccines and consumer healthcare products. It has a total of 97,921 (2015) employees working under its umbrella.
Revenue: 27.9 Billion GBP – FY16
SWOT & PESTLE Analysis
|1. Research and Development capabilities driving product expansion|
2. Global sales and marketing infrastructure
|1. GSK’s brand image being affected by the health care settlements in the US and the bribery charges against them|
|1. Growth opportunity in the vaccines business|
2. Growth opportunity in the HIV and infectious disease business
3. Growth opportunities in the emerging markets driven by the increasing awareness about healthcare needs
|1. Intense competition from generic drugs
2. Drug pricing controls leading to cost containment pressures
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1) Research & Development capabilities driving product expansion: GSK is committed towards technological innovation. This is evident from their R&D investments which accounted to £3.6 billion in 2016. The R&D budget was allocated across their three businesses on six core areas (respiratory diseases, HIV and infectious diseases, etc). The R&D success is evident from the fact that currently, they have 14 candidate vaccines for a range of diseases.
In addition to their internal R&D team, GSK has external partnerships and collaborations with 1500 academic bodies, biotechs and other pharmaceutical companies which have helped them over the years to formulate a strong basis for research and development. The increased focus on product development helps GSK to strengthen its market position and helps them in maintaining a robust product pipeline.
2) Global sales and marketing infrastructure: GSK has maintained a global footprint and is considered as one of the most prominent prescription pharmaceutical companies worldwide. They are present in 150+ markets. The global footprint has a dual advantage; firstly it helps the company with their strategic expansion in emerging markets and secondly, it enables GSK to go in for co-development and other collaborations with other industry stakeholders.
1) GSK’s brand image being affected by the health care settlements in the US and the bribery charges against them: GSK has been involved in many legal issues in the recent past. The company has been reported on several grounds regarding information related to safety data, false price reporting practices, illegally promoting antidepressants, etc.
In 2012, the company entered a settlement with the US government which is supposedly the largest settlement in the pharmaceutical world where GSK ended up paying a fine of $3 billion ($1 billion in criminal fines and $2 billion to resolve the civil liabilities). Although it has been five years since the incident, the thing that makes the issue still relevant is the fact that the case was levied against Paxil and Wellbutrin, GSK’s best-selling antidepressants. The non-monetary impact of such settlements is long-term, and the companies tend to take a major hit on their brand image which certainly was the case with GSK as well.
1) Growth opportunity in the Vaccines business: In 2016, the vaccines business contributed to 16% of GSK’s annual turnover. In 2015, GSK entered an agreement with Novartis whereby they acquired their vaccines business. The acquisition not only increased the breadth of offerings of the company in the vaccines domain but also provide an opportunity to use their combined expertise in bacterial infection and virology research and development.
2) Growth opportunities in the HIV and infectious diseases business: No breakthrough medicine treatment is available in this sector as of now. GSK has currently 14 compounds in research in this category out of which 7 of them are in phase III trial stage. So, there exists a lot of opportunities for GSK to become market-leaders in the segment shortly.
3) Growth opportunities in the emerging markets driven by the increasing awareness about healthcare needs: There is an increasing awareness towards healthcare needs among the masses driven through government initiatives. This in turn would lead to an increased demand for quality healthcare solutions. This provides GSK with growth opportunities, especially in emerging markets in their pharmaceutical and vaccines business as well as their consumer healthcare business.
1) Intense competition from Generic drugs: GSK had gained market exclusivity in the US because of its best-selling asthma drug Advair. Its patent expired in 2016 makes it one of the primary targets of the generic industry. The patent on the drug substance had expired back in 2010, but the patent on the Diskus inhaler had prevented it from the generics. With the expiry of the inhaler in 2016, other companies are looking to gain position in the asthma market with their generics already in line. Pharmaceutical companies like Mylan, Hikma and Vectura have already filled for their generic devices.
2) Drug pricing controls leading to cost containment pressures: In many countries, government controls the prices of drugs. This is achieved by putting regulations on the ceiling price of the drugs. The slowdown in the economic growth has led to several health reforms in European countries and cutbacks in health care spending and may lead to restrictions in pricing and reimbursement norms. In 2017, the drug price regulator in India, National Pharmaceutical Pricing Authority (NPPA) had slashed the prices of essential medicines and have added 11 new drugs under price control. Such drug pricing controls by the government pose a threat to GSK as it would cut down their profit margins.GlaxoSmithKline SWOT analysis has been conducted by Mahakpreet Singh Bhatia and reviewed by senior analysts from Barakaat Consulting.
1) GSK Annual Report: http://annualreport.gsk.com/
2) GSK Annual Report Asset: http://annualreport.gsk.com/assets/downloads/13_GSK.AR.Pipeline.pdf
3) Statnews: https://www.statnews.com/pharmalot/2016/06/06/supreme-court-glaxo-racketeering- diabetes/
4) NYTimes: http://www.nytimes.com/2012/07/03/business/glaxosmithkline-agrees-to-pay-3-billion-in-fraud-settlement.html
5) Business Standard: http://www.business-standard.com/article/companies/gsk-pharma-completes-acquisition-of-novartis-vaccines-business-115093001118_1.html
6) Economic Times: http://economictimes.indiatimes.com/industry/healthcare/biotech/pharmaceuticals/prices-of-essential-medicines-cut-by-30-50/articleshow/56791757.cms
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