QUOTE AND NEWS
Cloud Computing  Apr 10  Comment 
CHICAGO , April 10, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks...
Forbes  Apr 9  Comment 
Patient, physicians and payers are all demanding that new medicines deliver value over older or current therapies. Drug companies are setting out to do just that. However, running the types of studies that Novartis and GSK did are not trivial, are...
FierceBiotech  Apr 9  Comment 
GlaxoSmithKline is taking a berth next to teams from AstraZeneca, Pfizer and Johnson & Johnson in an ambitious alliance of industry giants aimed at discovering some new products in the red-hot cancer R&D field.
Benzinga  Apr 8  Comment 
The death toll from the deadly Ebola virus outbreak has topped 100, including 101 dead in Guinea and 7 in Liberia. Now there are reports the virus has spread to neighboring Mali. The WHO has said the outbreak is expected to take between two and...
StreetInsider.com  Apr 8  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Corporate+News/Teva+Pharma+%28TEVA%29+Reports+Approval%2C+Launch+of+Generic+Lovaza+in+U.S.+%28GSK%29/9361989.html for the full story.
Benzinga  Apr 8  Comment 
Below are the top drug manufacturers-major stocks on the NYSE in terms of dividend yield. AstraZeneca PLC (NYSE: AZN) has a dividend yield of 5.90%. AstraZeneca's shares closed at $64.05 yesterday. GlaxoSmithKline plc (NYSE: GSK) has a...
SeekingAlpha  Apr 7  Comment 
ByDoctoRx: Background: Because a game-changer like Gilead Sciences (GILD) Sovaldi comes along infrequently, some historical examples are in order. I have seen several breakthrough drug products in my roles as physician as well as via multi-year...
FiercePharma  Apr 7  Comment 
GlaxoSmithKline says it's rolling out sales and marketing reforms around the world. Apparently, the changes come none too soon. The British drugmaker opened another bribery investigation, this time in Iraq, to check out allegations that it paid...
MedPage Today  Apr 7  Comment 
(MedPage Today) -- Health news and commentary from around the Web, gathered by the MedPage Today staff.
New York Times  Apr 7  Comment 
GlaxoSmithKline said it was investigating claims of improper conduct, including hiring government-paid physicians to promote its products in Iraq.




 


GlaxoSmithKline (NYSE: GSK) is the second largest pharmaceutical company in the world by revenue. The company's products include prescription medication, vaccines, and consumer health products, though it manufactures products for many different therapeutic categories within these broad spaces. With dozens of potential drugs in the works, the company has a pipeline that includes twice as many late stage drugs as its nearest competitor. While the company will have to deal with major loses in patent protection in the next three to five years, its significant number of new products should help offset these losses. In FY 2010, GSK generated revenues of £28.4 billion and net earnings of £1.85 billion after taxes.[1]

GlaxoSmithKline's fortunes are further buoyed by several domestic and global demographic trends. As U.S. baby boomers and the U.S. population in general grow older, one can expect age related illness and the demand for medicines to treat them to increase. Furthermore, as obesity rises worldwide, the demand for effective treatments will continue to grow substantially.

Corporate Overview

History

GlaxoSmithKline is headquartered in England and employs over 100,000 people in 117 countries. It is the second largest drug manufacturer, in the world and the largest in Europe, by revenue. Its large size allows it to invest large amounts into research and development. In FY 2010, GSK generated revenues of £28.4 billion and net earnings of £1.85 billion after taxes.[2]

The company, like many of its peers, was formed through the merger of several smaller pharma companies. In 2001 Glaxo Wellcome and SmithKline Beecham, merged to create GSK's current incarnation..

Business Segments

GlaxoSmithKline has three different product areas: prescription medication, consumer health, and vaccines. While each of these units is sizable, GlaxoSmithKline is especially dominant in the vaccine market, supplying roughly one quarter of all vaccines worldwide. Some of its best known consumer products include Tums (antacids) and Aquafresh (toothpaste). GlaxoSmithKline's prescription products include medications to treat cancer, asthma, malaria, and depression among other maladies.

Pharmaceutical (GBP 23.4 Billion)

The bulk of GlaxoSmithKline’s revenues -- 83% in 2009 -- comes from the sale of prescription medications. GlaxoSmithKline has medications in many different therapeutic categories, including cardiovascular, respiratory, and central nervous system. Some of its most important prescription products include:

Seretide/Advair (GBP 55.1 Billion)

Seretide/Advair is approved to treat asthma and Chronic Obstructive Pulmonary Disease (COPD). This product is a long-acting anti-inflammatory and bronchodilator (it opens up a patient's air passages) and is taken through an inhaler. There are more than 20 million Americans who suffer from asthma. Further, it is possible that in developing countries with lower safety standards in the workplace, more cases of occupational asthma could develop, providing new markets for this medication.

Avandia (GBP 440 million)

Avandia is a metabolic product for the treatment of diabetes. It is used to moderate insulin levels and is very effective in helping to control type 2 diabetes. Avandia sales have fallen dramatically since Avandia received a black box warning, the severest possible, from the Food and Drug Administration (FDA) in 2007 after it was found that Avandia increases the risk of developing a cardiovascular problem. A major study assessing the risk of the drug will not be complete until 2014. The drug’s sales were suspended entirely in Europe, while its distribution in the US was severely restricted with a number of protections in place to ensure that patients are aware of the possible side-effects.[3]

Anti-Virals (GBP 1.1 billion)

GSK's anti-virals franchise, which includes genital herpes treatment Valtrex, HIV treatment Epzicom, and influenza treatment Relenza. GSK has been seeing higher sales of its flu treatment, Relenza, in the wake of the global Influenza outbreak of 2009. It is just one of two drugs approved for treatment to reduce the effects of the swine flu virus, the other being Roche Pharmaceuticals (RHHBY)'s Tamiflu.[4]

Vaccines (GBP 4.3 Billion)

GSK's vaccines are used to treat a wide range of ailments including hepatitis, meningitis, influenza and various childhood diseases. Specific products include Havrix for hepatitis A, Engerix-B for hepatitis B, and the group Mencevax for meningitis.

Although demand for vaccines has remained generally constant, there are several situations that could cause fluctuations. If the birth rate were to suddenly increase, more children would need vaccines against childhood diseases such as measles, mumps, and chicken pox. Additionally, an influenza outbreak would vastly increase demand for flu vaccines. In 2009, GSK received a significant boost in orders for its Pandemrix™ H1N1 vaccine, following the global outbreak. A similar increase was initially expected in 2010, but when there were fewer H1N1 cases than expected, many countries cancelled or downsized their orders. This was an example of the volatility of the influenza vaccine market.

Consumer Health Care (GBP 5 Billion)

GlaxoSmithKline's consumer health care products include over-the-counter medications, nutritional supplements, and oral care products. Some of the major products include Aquafresh, a well-known toothpaste brand, Sensodyne, a toothpaste specifically for sensitive teeth, Tums and Citrucel for gastro-intestinal ailments, and Nicorette products to help users quit smoking.

Research and Development (GBP 4.46 Billion)

The development process for new drugs is risky and extremely expensive. The process from concept to market takes anywhere from 10 to 15 years. Most medications do not make it past the clinical trials phase of development. For every success there are multiple failures. The final product, once formulated, is protected under patent for generally less than 10 years after release. GlaxoSmithKline has one of the broadest pipelines, or group of potential products, in the industry. While many of these drugs will ultimately fail, the possibility of even one being a blockbuster (annual sales of over $1 billion USD) is worth the initial investment.[5]

In 2007, GSK's research and development process eliminated "me-too" drug research and shut down research in areas of depression, anxiety, pain and other mature categories, concentrating focus on emerging markets. The early-stage research was divided into 40 autonomous biotech-style research teams, with between 7 and 70 scientists each. Each unit leader essentially functions as the head of a small biotech company and sets a three-year budget with the freedom to invest it as he/she sees fit.[6]

Trends and Forces

Tightening FDA Regulations

Beginning in 2009, the FDA implemented a series of reforms that include stricter monitoring of drug adverse events, more funding for the agency, stronger ability to force product recalls, more scientific expertise within the agency, more transparency. While the tightened regulations and increased transparency will eventually improve the overall quality of pharmaceutical products, companies will have to adjust to the stricter standards and stronger enforcement.[7]

GSK plans growth in emerging markets

GSK is one of the most aggressive pharmaceutical companies when it comes to expanding its presence in emerging markets. The company's strategy includes scaling up its branded generics business, obtaining more government contracts for its vaccine business, and pushing more of its patented medications in developing countries. The emerging market, which includes rising middle classes in Asia, Latin America, the Mid-East and Africa, is already estimated at $81 billion and is expected to double by 2020.[8] GSK has already looked at expanding its branded generic's business, acquiring generics businesses from Eli Lilly and UCB Pharma, and is striking deals with established emerging market generic companies such as India's Dr. Reddy's Labs and Africa's Aspen Pharmacare.GSK faces strongest competition in this area from Pfizer, Novartis, and Sanofi Aventis[9] GSK's ability to capitalize on emerging markets will have a significant impact on its growth during the coming decade.

Patent expirations

For a detailed discussion of brand name vs. generic medication, see also Generic drugs.

Patent exclusivity is essential within the pharmaceutical industry, where the market exclusivity granted by patents enables companies to enjoy a period of high profitability necessary to justify the high costs of development for a novel therapeutic. Moreover, in the pharmaceutical industry, a single patent covering the active ingredient of the drug can oftentimes represent the entire unique value of that product.[10]

The United States, European Union, Japan, and most developed nations in the world offer an accelerated generic drug approval process whereby competitors can develop generic versions of brand name drugs with expired patents. The accelerated approvals, known as ANDAs in the US, only require that the sponsor company show that their drug is equivalent to the name-brand drug, enabling that company to bypass the expensive and time consuming clinical trials required of a novel drug.[11] The relatively cheap cost to develop generics in comparison to name-brand drugs enables generic companies to substantially undercut prices, to the tune of $10 billion total, annually across the industry.[12]

Although GSK has four drugs losing patent exclusivity before 2012, it has a relatively young product portfolio. In addition, although the company's best selling drug, Seretide/Advair, lost its patent exclusivity, the company has maintained sales due to its patent on the drug delivery device, which is not set to expire until at least 2016.[13]

Politics and Insurance

Like other global pharmaceutical companies, GlaxoSmithKline faces constant pressure from governments and activist organizations to increase access to medications by either lowering prices substantially or removing patent restrictions so generics can be manufactured.

Medicare and Medicaid policies have an important impact on GlaxoSmithKline's sales. Medicare is the federal government's health subsidy plan while Medicaid generally falls to the states. Policies allow the government to bargain for lower prices; essentially the government caps prices for a large number of plans. This lowers revenues while increasing the amount of medications sold. Additionally, the government often requires rebates be paid at the end of the year.

Flu Pandemics/Epidemics

There is always a threat of a regional or even global outbreak of a major influenza virus. For example, the Spanish influenza pandemic of 1918 infected 500 million people and killed 10% of victims.[14] More recently, the Avian flu of the early 2000s killed at least 200 people around the world, particularly in Southeast Asia.[15] The Swine flu scare of April 2009 similarly threatened countries all over the world, and the possibility that a future swine flu variant could turn into a major flu pandemic is a serious concern. Public health officials all over the world have stocked up on vaccines and treatments in the event of such an outbreak. GlaxoSmith Kline's Relenza is one of two approved influenza treatments, along with Roche Pharmaceuticals (RHHBY)'s Tamiflu. A similar increase was initially expected in 2010, but when there were fewer H1N1 cases than expected, many countries cancelled or downsized their orders. A sustained period of calm can result in decreased demand for Relenza and hurt GSK's bottom line, but renewed fear of outbreak (such as the Swine flu scare) can be a significant boon to earnings.

Avandia Risks

In 2010 GSK agreed to pay $460 million to settle a majority of lawsuits that alleged that use of Avandia caused heart attacks and strokes.[16]

Following the settlement, the drug’s sales were suspended entirely in Europe, while patients in the United States will be allowed access to the medicine only if the patients and their doctors attest that they have tried every other diabetes medicine and that patients have been made aware of the drug’s substantial risk for cardiac-related side effects.[3]

Quality Control

In late 2010, the company agreed to pay $750 million to settle criminal and civil complaints that the company for years knowingly sold contaminated baby ointment and an ineffective antidepressant. Altogether, GSK sold 20 drugs with questionable safety that were made at a plant in Puerto Rico that for years was rife with contamination.

Whistleblower Cheryl Eckard, the company’s former quality manager, asserted in her suit that she had warned the company of the problems but GSK fired her instead of addressing them. There is a rising trend of whistle blower lawsuits as big pharmaceuticals reduce their workforces to counter-act lower sales and a lack of new blockbuster drug approvals.[17]

Competition

The pharmaceutical market is a very competitive arena on several fronts. First is the generic competition and loss of patent, as discussed above. Other competition includes branded competition amongst drugs with similar therapeutic areas .

Advair, one of GlaxoSmithKline's biggest drugs for asthma (see above) faces competition from AstraZeneca's 's Symbicort, which is expected to launch in 2007. Additionally, Avandia, the diabetes drug discussed above, will likely face competition from Merck (MRK)'s new oral diabetes drugs Januvia and Janumet. With the FDA's decision to require extra warnings on Avandia concerning heart failure, Merck (MRK) may be able to expand its portion of the type 2 diabetes market.

Successful competition requires diversification, size, investment in research (including a broad pipeline) and of course minimization of costs and high sales. GlaxoSmithKline is far ahead of the competition as far as new research. It has nearly double as many drugs in late stage development as its closest competitor, Pfizer (PFE). GSK, however, has significantly lower earnings than Pfizer despite having significantly similar sales. This is largely due to the company's higher operating costs and the costs associated with its recent acquisitions. GlaxoSmithKline's biggest competitors include Pfizer (PFE), Novartis AG (NVS), Merck (MRK), and Schering-Plough (SGP).

Competition in the pharmaceutical industry lies mostly in specific drug markets. For example, a new diabetes drug is not going to have any effect on an existing cholesterol drug, no matter how successful it is. As a result, financial data on the pharmaceutical companies do not tell the whole story. Instead, it may be more appropriate to analyze GSK's competitors by each drug market (See section on Major Drugs and Industry Trends).

References

  1. GSK 2010 Annual Filing, p. 35, 37
  2. GSK 2010 Annual Filing, p. 35, 37
  3. 3.0 3.1 F.D.A. to Restrict Avandia, Citing Heart Risk
  4. Reuters. "Swine flu a bonus for Glaxo's Relenza flu drug." 22 July 2009
  5. GSK 2009 Annual Report
  6. Shrink It, Cure It - Forbes.com
  7. The FDA: A tough tonic
  8. Glaxo plans to beat rivals in emerging markets
  9. Glaxo plans to outgrow rivals in emerging markets
  10. [www.earth.columbia.edu/cgsd/documents/lehman.pdf The Pharmaceutical Industry and the Patent System]
  11. Abbreviated New Drug Application (ANDA): Generics
  12. Trends in FDA Approval of Generic Drugs
  13. GSK 2010 Annual Filing, p. 15
  14. Wikipedia Entry on Spanish Flu
  15. Wikipedia Entry on Avian Flu
  16. Reuters. "Glaxo to play $460 million in Avandia Settlement." July 13 2010
  17. http://www.nytimes.com/2010/10/27/business/27drug.html?pagewanted=2&_r=1 Glaxo to Pay $750 Million for Sale of Bad Products]
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki