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{{hide_logo|path=[[Image:Glaxosmithklinelogo.jpg‎|left|180px]]}} {{hide_logo|path=[[Image:Glaxosmithklinelogo.jpg‎|left|180px]]}}
-GlaxoSmithKline (NYSE: GSK) is the second largest pharmaceutical company in the world by revenue. It achieved sales of 28.4 billion ([[British Pound (GBP)]] in 2009. The company's products include prescription medication, vaccines, and consumer health products, though it manufactures products for many different therapeutic categories even within these 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 [[Pharmaceutical patents | patent protection]] in the next three to five years, its significant number of new launches should help offset these losses.+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 [[Pharmaceutical patents | 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.<ref>[http://www.wikinvest.com/stock/GlaxoSmithKline_(GSK)/Filing/20-F/2011/F94633971#U10626107 GSK 2010 Annual Filing, p. 35, 37]</ref>
GlaxoSmithKline's fortunes are further buoyed by several domestic and global demographic trends. As U.S. [[Aging Baby Boomers|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. GlaxoSmithKline's fortunes are further buoyed by several domestic and global demographic trends. As U.S. [[Aging Baby Boomers|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 == == 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. After-tax profits in 2009 were GBP 5.7 billion, up from GBP 4.7 billion the year before.+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.<ref>[http://www.wikinvest.com/stock/GlaxoSmithKline_(GSK)/Filing/20-F/2011/F94633971#U10626107 GSK 2010 Annual Filing, p. 35, 37]</ref>
-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.+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..
-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 [[Incidence of Cancer|cancer]], asthma, malaria, and depression among other maladies.+==Business Segments==
-=== Business Growth ===+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 [[Incidence of Cancer|cancer]], asthma, malaria, and depression among other maladies.
-In Q1 of 2010, GSK reported sales of £7.4 billion, a growth of 13% over the same quarter of 2009. Sales growth was driven by strong sales increases in emerging markets (43%), Asia/Pacific (45%), and new products (65%). Sales also received a boost from H1N1 pandemic vaccine sales of £1.1 billion. GSK also reported a post-tax net income of £1.6 billion, representing an 18% growth for the quarter.<ref>[http://www.gsk.com/financial/overview.htm GSK Investor Relations]</ref> GSK's earnings beat analyst estimates by almost $200 million for the quarter.<ref>[http://uk.reuters.com/article/idUKLDE63P20E20100428 Tail-end of swine flu helps Glaxo beat forecasts]</ref>+
-In Q4 2009, GSK reported sales of £8.09 billion, a growth of 17% over the same quarter of 2008. Earnings rose 33% to 35.4 pence per share. GSK's growth for the quarter was largely driven by increased sales in its healthcare division and emerging markets. Profits also got a boost from sales of the H1N1 vaccine and an HIV partnership with Pfizer.<ref>[http://www.gsk.com/investors/reports/q42009/q42009.pdf GSK delivers 2009 EPS of 121.2p before major restructuring and dividend of 61p]</ref> GSKs earning for the quarter beat analyst expectations.Despite the higher-than-expected earnings for the quarter, GSK announced job cuts and research cuts, including large cuts in its antidepressant research. This comes in the face of tightening conditions for the industry as a whole as patent expirations threaten drug prices.<ref>[http://www.reuters.com/article/idUSLDE6121B920100204 Glaxo drops some drug research in efficiency drive]</ref>+=== Pharmaceutical (GBP 23.4 Billion) ===
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-In Q3 2009, GSK reported sales of £6.76 billion, a growth of 3% from the same quarter of 2008. Major drivers behind the growth included boosted sales of flu vaccine, Relenza, as well as expansion into emerging markets and Japan and expansion of GSK's consumer health business. Growth was hindered, on the other hand, by decreased sales in the U.S. due to increased generic competition.<ref>[http://www.gsk.com/financial/quarterly_results.htm Q3 2009 results announcement]</ref> GSK's pretax profit reached £2.07 billion, which slightly missed analyst targets for the quarter.<ref>[http://www.reuters.com/article/healthcareSector/idUSLR45420820091028 Swine flu gives Glaxo a shot in the arm]</ref>+
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-====Business Development====+
- +
-In April 2008, GlaxoSmithKline CEO designate Andrew Witty presented plans detailing a new framework for the company's international business. Witty, who will assume the position of CEO in late May when Jean-Pierre Garnier officially retires, emphasized a new focus on emerging markets. A new division will be created to focus specifically on emerging markets, an area that has hurt the company's profits in recent quarters. The emerging markets division will focus on operations in Brazil, Russia, India, China and the Middle East. Witty also plans to refine the current team structure for other geographic regions. A new Asian Pacific group will combine many Asian countries (excluding China) with the current group that manages Japan. Canada, the U.S. and Puerto Rico will be combined into the North American division. Witty has also created a new division, the Corporate Strategy and Development team, to focus exclusively on finding new places for expansion. The group's focus will include finding new business opportunities, partnerships and potential acquisitions for GlaxoSmithKline.<ref>[http://online.wsj.com/article/SB120957315354556651.html?mod=rss_whats_news_us "Glaxo's New Chief Shuffles Ranks], [www.wsj.com The Wall Street Journal Online], May 1, 2008.</ref>+
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-In July 2008, GSK entered into a licensing agreement with Aspen, a South African generics manufacturer. Exact details of the agreement are not available, but it licenses GSK drugs for Aspen to manufacture and includes profit-sharing clauses.<ref name=PR080723/> The company has stated that this was part of its effort to expand in the emerging markets, which are forecasted to grow by 13%, or 3 times more than the established Western markets.<ref name=PR080723>{{cite web| url=http://www.gsk.com/media/pressreleases/2008/2008_pressrelease_10086.htm| title=GSK enters transformational agreement with Aspen to drive growth in emerging markets}}</ref>+
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-== Products and Revenue ==+
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-=== Pharmaceutical (GBP 27.3 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: 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 5 Billion):''' This product is a long-acting bronchodilator, meaning it opens up the patients' air passages, and an anti-inflammatory taken through an inhaler. Seretide/Advair is approved to treat asthma and Chronic Obstructive Pulmonary Disease (COPD). In 2004, it was estimated that roughly 20 million Americans (between 5 and 10%) have asthma; there is clearly a very large market for treatments. While there are no indications that the number of cases of asthma is growing, there has been no marked decrease either. Further, it is possible that in developing countries with laxer safety conditions in the workplace, more cases of occupational asthma could develop, providing new markets for this medication.+====Seretide/Advair (GBP 5.1 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.
-**In a new study by the FDA, however, Seretide/Advair was linked to an increase in serious long-term asthma-related side effects. Similar drugs of the same class from other major drug manufacturers were also implicated, making any regulatory action likely unilateral. <ref>[http://www.smartmoney.com/breaking-news/on/?story=ON-20081205-000723-0951| Dow Jones. "FDA: Long-Acting Asthma Drugs Boost Asthma Risk." 5 December 2008.]</ref>+====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.<ref name=AVANDIANYTIMES />
-* '''Avandia (GBP 771 million):''' Avandia is a [[metabolic]] product for the treatment of diabetes. It is used to level insulin levels and is very effective in mitigating type 2 diabetes. Despite its high sales, however, Avandia has recently faced some challenges in the United States. An advisory committee of the [[Food and Drug Administration]] (FDA) in July 2007 found that Avandia carries potential cardiovascular risks. While the FDA has not decided to remove the drug from the market, in November of 2007 Avandia received a black box warning, the severest possible. Sales in 2009 fell by 16 percent. A major study assessing the risk of the drug will not be complete until 2014. The FDA is holding a Joint Meeting of the Endocrinologic and Metabolic Drugs Advisory Committee and the Drug Safety and Risk Management Advisory Committee Meeting to evaluate the safety of Avandia on July 13-14 2010.<ref>[http://www.fda.gov/AdvisoryCommittees/Calendar/ucm214612.htm| July 13–14, 2010: Joint Meeting of the Endocrinologic and Metabolic Drugs Advisory Committee and the Drug Safety and Risk Management Advisory Committee Meeting Announcement FDA, July 8 2010.]</ref> +===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.<ref>[http://www.reuters.com/article/companyNews/idUSN2235230920090723?symbol=GSK| Reuters. "Swine flu a bonus for Glaxo's Relenza flu drug." 22 July 2009]</ref>
-**On July 13th 2010 it was reported that GSK has agreed to pay about $460 million to settle a majority of lawsuits that alleged that use of Avandia caused heart attacks and strokes. This announcement is not confirmed by GSK's spokesperson but was reported by Bloomberg News. This report came as GSK defended Avandia's safety during a two-day meeting with the FDA. <ref>[http://uk.reuters.com/article/idUKTRE66C4TN20100713| Reuters. "Glaxo to play $460 million in Avandia Settlement." July 13 2010]</ref>+=== 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.
-* '''Anti-Virals (GBP 4.2 billion):''' GSK's anti-virals franchise, which includes genital herpes treatment Valtrex, HIV treatment Epzicom, and influenza treatment Relenza. Total anti-viral sales grew 12% in 2009. GSK is also seeing greatly increased 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. Governments are stockpiling both in the event the disease becomes resistant to one of the drugs. <ref>[http://www.reuters.com/article/companyNews/idUSN2235230920090723?symbol=GSK| Reuters. "Swine flu a bonus for Glaxo's Relenza flu drug." 22 July 2009]</ref>+
-=== Vaccines (GBP 3.7 Billion) ===+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.
-As mentioned above, GlaxoSmithKline currently produces nearly a quarter of vaccines sold worldwide. Its 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. There has not been a major outbreak in several decades, and the Center for Disease Control (CDC) expects that an outbreak could occur in the coming decades.+=== Consumer Health Care (GBP 5 Billion) ===
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-*A recent European study has shown GlaxoSmithKline's Rotarix, a new rotavirus vaccine, to be highly effective. Rotavirus causes severe diarrhoea in young children. Compared to the control group, children given Rotarix were 90% less likely to develop symptoms. Rotarix will be in direct competition with Merck's Rotateq, which is also in late clinical trials.+
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-*On October 6, 2009, GSK announced that it had received orders for 149 million additional doses from governments around the world for its Pandemrix™ H1N1 vaccine, bringing its total orders up to 440 million, worth approximately $3.5 billion.<ref>[http://www.gsk.com/media/pressreleases/2009/2009_pressrelease_10104.htm GlaxoSmithKline update: Government orders for pandemic (H1N1) 2009 vaccine]</ref><ref>[http://www.reuters.com/article/BIOTRX/idUSL619658220091006 New Glaxo orders point to big flu vaccine windfall]</ref> Analysts estimate H1N1 vaccine sales to reach $1.44 billion in Q4.<ref>[http://www.reuters.com/article/marketsNews/idCNLU55530020091030?rpc=44 Glaxo takes biggest slice of swine flu market]</ref> However, as the 4th quarter closes for vaccine-makers such as GSK, reports show that H1N1 sales have fallen well below analyst estimates. Analysts now predict pandemic vaccine sales for GSK to reach about £835 million, or about half of the earlier estimates.<ref>[http://blogs.barrons.com/stockstowatchtoday/2010/01/19/limited-swine-flu-vaccine-demand-dents-drug-cos/ Limited Swine Flu Vaccine Demand Dents Drug Cos.]</ref>+
- +
-=== Consumer Health Care (GBP 4.7 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. 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 ==+== Research and Development (GBP 4.46 Billion)==
-The development process for new drugs is a risky and expensive business. In 2008, GlaxoSmithKline spent GBP 4.11 Billion on research into new treatments and products, nearly 15% of its total sales. 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 [[pipeline|pipelines]], or group of potential products, in the industry. As of February 2007, there were 158 vaccine and pharmaceutical products in some stage of clinical development, and 31 products in Phase III (late stage) development. While many of these drugs will ultimately fail, the sheer volume of potential products is higher than many other pharmaceutical companies. +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 [[pipeline|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.<ref>[http://www.gsk.com/investors/reps09/GSK-Report-2009-full.pdf GSK 2009 Annual Report]</ref>
-Additionally, several of the products GlaxoSmithKline is developing are in therapeutic areas with high demand. Cervarix, for instance, is a vaccine for human papillomavirus (HPV). Recent studies have linked HPV to cervical cancer. The vaccine would eliminate the potential for getting the virus, reducing the likelihood of developing cervical cancer. The vaccine is currently undergoing clinical trails for a 10 month period which began in Jun. If successful it could be released in early 2008. Cervarix will face competition from [[Merck (MRK)]]'s HPV vaccine which is already out, but the market is not saturated so there is space for a new HPV vaccine.+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.<ref>[http://www.forbes.com/forbes/2011/0117/features-glaxosmithkline-andrew-witty-shrink-it-cure-it.html Shrink It, Cure It - Forbes.com]</ref>
- +
-Another vaccine in late clinical trials is H5N1, a pandemic flu vaccine. Success of this product would position GlaxoSmithKline strongly in the flu vaccine market in the case of an [[influenza outbreak]]. [[Novartis AG (NVS)]] is also working on pandemic flu vaccines, and so GlaxoSmithKline could face competition in this area. +
- +
-Some other products likely to appear in the next few years include Coreg CR for cardiovascular conditions, Tykerb, a breast cancer treatment, Trexima for migraines, and Allermist to treat allergic rhinitis.+
== Trends and Forces == == Trends and Forces ==
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===Tightening FDA Regulations=== ===Tightening FDA Regulations===
-When FDA commissioner Margaret Hamburg began her tenure in 2009, she announced that the FDA would toughen it's enforcement efforts to protect public health.<ref>[http://www.nytimes.com/2009/06/17/us/17fda.html New F.D.A. Chief Says She’ll Toughen Enforcement Efforts]</ref> As the FDA has drawn criticisms for its failures in preventing deaths caused by drugs such as Vioxx, Hamburg has come in with several fixes that include stricter monitoring of drug adverse events, more funding for the agency, stronger ability to force product recalls, and more scientific expertise within the agency.<ref>[http://www.nature.com/news/2009/091125/full/462406a.html The FDA: A tough tonic]</ref> On May 19, 2010, the FDA announced 21 proposals aimed at increasing transparency to the public regarding regulatory information.<ref>[http://www.minyanville.com/businessmarkets/articles/fda-fda-new-guidance-drug-approval/5/20/2010/id/28410?camp=syndication&medium=portals&from=yahoo FDA Transparency Could Tank Pharma Stocks]</ref>+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.<ref>[http://www.nature.com/news/2009/091125/full/462406a.html The FDA: A tough tonic]</ref>
- +
-Such information will increase the amount of information accessible to the public with regard to companies' pipeline drugs and manufacturing facilities that might otherwise not have been disclosed. While the tightened regulations and increased transparency will eventually improve the overall quality of pharmaceutical products, there will be growing pains as companies adjust to the stricter standards and stronger enforcement. GSK's ability to adjust to these new standards will impact its valuation and financial success.+
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===GSK plans growth in emerging markets=== ===GSK plans growth in emerging markets===
-In December 2009, GSK announced a three-pronged plan strategy to expand its presence in emerging markets. The plan 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 growing fast enough to double by 2020.<ref>[http://finance.yahoo.com/news/Glaxo-plans-to-beat-rivals-in-apf-2137832541.html?x=0&.v=1 Glaxo plans to beat rivals in emerging markets]</ref> GSK has already looked at expanding its branded generic's business, acquiring such businesses from [[Eli Lilly and Company (LLY)|Eli Lilly]] and [[UCB SA (UCB-BT)|UCB Pharma]], and is striking deals with established emerging market generic companies such as India's [[Dr. Reddy's Laboratories (RDY)|Dr. Reddy's Labs]] and Africa's [http://www.aspenpharma.com/ Aspen Pharmacare].GSK faces strongest competition in this area from [[Pfizer (PFE)|Pfizer]], [[Novartis AG (NVS)|Novartis]], and [[Sanofi-Aventis SA (SNY)|Sanofi Aventis]]<ref>[http://www.reuters.com/article/idCNGEE5B91Q620091210?rpc=44 Glaxo plans to outgrow rivals in emerging markets]</ref> GSK's ability to capitalize on emerging markets will have a significant impact on its growth during the coming decade.+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.<ref>[http://finance.yahoo.com/news/Glaxo-plans-to-beat-rivals-in-apf-2137832541.html?x=0&.v=1 Glaxo plans to beat rivals in emerging markets]</ref> GSK has already looked at expanding its branded generic's business, acquiring generics businesses from [[Eli Lilly and Company (LLY)|Eli Lilly]] and [[UCB SA (UCB-BT)|UCB Pharma]], and is striking deals with established emerging market generic companies such as India's [[Dr. Reddy's Laboratories (RDY)|Dr. Reddy's Labs]] and Africa's [http://www.aspenpharma.com/ Aspen Pharmacare].GSK faces strongest competition in this area from [[Pfizer (PFE)|Pfizer]], [[Novartis AG (NVS)|Novartis]], and [[Sanofi-Aventis SA (SNY)|Sanofi Aventis]]<ref>[http://www.reuters.com/article/idCNGEE5B91Q620091210?rpc=44 Glaxo plans to outgrow rivals in emerging markets]</ref> GSK's ability to capitalize on emerging markets will have a significant impact on its growth during the coming decade.
=== Patent expirations === === Patent expirations ===
- 
-[[Image:GSK_Patents.png|thumb|right|400px|Proportion of GSK's revenue that is earned from drugs whose patents will expire or have expired during the time-frame on the x-axis.<ref>[http://www.gsk.com/investors/annual-reports.htm 2008 GSK 20-F Annual Report, p. 20]</ref>]] 
- 
:''For a detailed discussion of brand name vs. generic medication, see also [[Generic drugs]].'' :''For a detailed discussion of brand name vs. generic medication, see also [[Generic drugs]].''
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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.<ref>[http://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/ApprovalApplications/AbbreviatedNewDrugApplicationANDAGenerics/default.htm Abbreviated New Drug Application (ANDA): Generics]</ref> 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.<ref>[http://www.uspharmacist.com/content/t/generic_medications/c/10307/ Trends in FDA Approval of Generic Drugs]</ref> 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.<ref>[http://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/ApprovalApplications/AbbreviatedNewDrugApplicationANDAGenerics/default.htm Abbreviated New Drug Application (ANDA): Generics]</ref> 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.<ref>[http://www.uspharmacist.com/content/t/generic_medications/c/10307/ Trends in FDA Approval of Generic Drugs]</ref>
-GSK lost patent exclusivity to several major drugs from 2006 to 2008, including Wellbutrin XL, Lemactil, Zofran, and Coreg. GSK's major genital herpes therapy Valtrex, which brought in €1.2 +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.<ref>[http://www.wikinvest.com/stock/GlaxoSmithKline_(GSK)/Filing/20-F/2011/F94633971#U10626107 GSK 2010 Annual Filing, p. 15]</ref>
-billion in 2008, is set to lose patent exclusivity at the end of 2009, and their blockbuster asthma therapy Advair, which earned over €4.1 in 2008, will lose exclusivity in 2010. By 2011, 43% of GSK's 2008 revenue will be represented by drugs that will face generic competition. However, it is important to note that GSK already earns almost €5 billion from drugs with expired patents. Moreover, GSK spends 15.1% of sales on R&D and will look to compensate for these anticipated losses through the development of novel therapies.<ref>[http://www.gsk.com/investors/annual-reports.htm 2008 GSK 20-F Annual Report, p. 12]</ref>+
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=== Politics and Insurance === === Politics and Insurance ===
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[[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. [[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.
-Over the past several years, many states and the federal government have begun suing multiple pharmaceutical companies because of alleged price fraud. The states are suing based on alleged defrauding of the state health care assistance program, Medicaid. If the states win, the pharmaceutical companies will be forced to pay hundreds of millions of dollars and change pricing schemes. While the first trial in these cases will not be finished for at least another year, this litigation could greatly affect GlaxoSmithKline. Additionally, changes in Medicare and Medicaid legislation could cut into revenues even more in the future, especially if nationalized or cheaper health care advocates come into office.+=== 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.<ref>[http://en.wikipedia.org/wiki/Spanish_flu Wikipedia Entry on Spanish Flu]</ref> More recently, the Avian flu of the early 2000s killed at least 200 people around the world, particularly in Southeast Asia.<ref>[http://en.wikipedia.org/wiki/Avian_Flu Wikipedia Entry on Avian Flu]</ref> 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.
-There are currently no well publicized cases against GlaxoSmithKline other than these pricing cases, but just under a year ago the company settled for $63.8 million on claims that it promoted its antidepressant drug Paxil for use by children while withholding information about the medication's safety. The suit was a class action, and highlights the constant threat of litigation and the care that must be taken in marketing pharmaceutical products.+====Avandia Risks====
-=== Flu Pandemics/Epidemics ===+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.<ref>[http://uk.reuters.com/article/idUKTRE66C4TN20100713| Reuters. "Glaxo to play $460 million in Avandia Settlement." July 13 2010]</ref>
-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 <ref>[http://en.wikipedia.org/wiki/Spanish_flu Wikipedia Entry on Spanish Flu]</ref>. More recently, the Avian flu of the early 2000s killed at least 200 people around the world, particularly in Southeast Asia. <ref>[http://en.wikipedia.org/wiki/Avian_Flu Wikipedia Entry on Avian Flu]</ref>. The Swine flu scare of April 2009 similarly has threatened countries all over the world, and the possibility that it 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 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. GSK increased production capacity of Relenza in 2009 to 190 million treatment courses in anticipation of such an event.+
-On September 25, 2009, the European Committee for Medicinal Products for Human Use (CHMP) recommended approval of GSK's H1N1 vaccine, Pandemrix™. This recommendation means that the vaccine will be immediately reviewed for approval to market for H1N1 prevention. GSK is currently conducting 16 clinical trials with 9000 patients to further evaluate the effectiveness of the vaccine against the H1N1 virus.<ref>[http://www.gsk.com/media/pressreleases/2009/2009_pressrelease_10089.htm GSK’s H1N1 ‘Pandemrix’ vaccine receives positive opinion from European Regulators]</ref> On October 6, 2009, GSK announced that it had received orders for 149 million additional doses from governments around the world for its Pandemrix™ H1N1 vaccine, bringing its total orders up to 440 million, worth approximately $3.5 billion.<ref>[http://www.gsk.com/media/pressreleases/2009/2009_pressrelease_10104.htm GlaxoSmithKline update: Government orders for pandemic (H1N1) 2009 vaccine]</ref><ref>[http://www.reuters.com/article/BIOTRX/idUSL619658220091006 New Glaxo orders point to big flu vaccine windfall]</ref>+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.<ref name=AVANDIANYTIMES>[http://www.nytimes.com/2010/09/24/health/policy/24avandia.html F.D.A. to Restrict Avandia, Citing Heart Risk]</ref>
-In January 2010, reports indicated that pandemic flu vaccine sales were below original estimates, as many countries found themselves with more doses than required to meet demand. Germany led the way in cutting orders, slashing the amount of H1N1 vaccines on order by 30%. The UK, France, Spain, Netherlands, and Belgium are discussing cuts as well.<ref>[http://www.reuters.com/article/idUSLDE60B1KO20100112?type=marketsNews Glaxo H1N1 German order cut to 70 pct of original]</ref> Analysts now predict pandemic vaccine sales for GSK to reach about £835 million, or about half of the earlier estimates.<ref>[http://blogs.barrons.com/stockstowatchtoday/2010/01/19/limited-swine-flu-vaccine-demand-dents-drug-cos/ Limited Swine Flu Vaccine Demand Dents Drug Cos.]</ref>+====Quality Control====
-== Comparison to Competitors ==+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.
-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 [[Indication|indications]] . +
-Advair, one of GlaxoSmithKline's biggest drugs for asthma (see above) faces competition from [[AstraZeneca (AZN)|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. If the FDA decided to require warnings on Avandia concerning heart failure, [[Merck (MRK)]] could very easily take a large portion of the type 2 diabetes market share. +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.<ref>http://www.nytimes.com/2010/10/27/business/27drug.html?pagewanted=2&_r=1 Glaxo to Pay $750 Million for Sale of Bad Products]</ref>
-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 ==
 +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 [[Indication|therapeutic areas]] .
 +Advair, one of GlaxoSmithKline's biggest drugs for asthma (see above) faces competition from [[AstraZeneca (AZN)|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.
-<wikichart width="400" height="400" flashvars="ticker=NYSE:GSK,NYSE:PFE,NYSE:MRK&tickerAlias=Share Prices of GSK and Competitors"/>+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|Major Drugs and Industry Trends]]). 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|Major Drugs and Industry Trends]]).
- 
-The table below displays competitive operating metrics for competitors within the pharmaceutical industry. Note that the total revenue for Merck and Pfizer was influenced by revenue inherited from their acquisitions of Schering-Plough and Wyeth, respectively. In addition, net income for Merck was bolstered by $3.2 billion from the sale of its animal division <ref>[http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjY2NzI1NnxDaGlsZElEPTM2ODkxOXxUeXBlPTI=&t=1 Merck Announces Fourth-Quarter and Full-Year 2009 Financial Results]</ref>, while Bristol-Meyers Squibb's net income saw a one-time $7.2 billion increase from the sale of its nutrition division.<ref>[http://www.reuters.com/article/idUSN2713809320100128 Bristol beats forecast, helped by lower taxes]</ref>  
- 
-<center> 
-<table class=MsoTableMediumShading1Accent1 border=1 cellspacing=0 
- cellpadding=0 style='border-collapse:collapse;border:none'> 
- <tr> 
- <td width=878 colspan=14 valign=top style='width:9.15in;border:solid #7BA0CD 1.0pt; 
- background:#4F81BD;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><b><span style='font-family:"Calibri","sans-serif"; 
- color:white'><br> 
- </span></b><b><span style='font-size:14.0pt;font-family:"Calibri","sans-serif"; 
- color:white'>Pharmaceutical and Biotech Industry — Competitive Operating 
- Metrics (2009)<br> 
- <br> 
- </span></b></p> 
- </td> 
- </tr> 
- <tr> 
- <td width=139 valign=top style='width:1.45in;border-top:none;border-left: 
- solid #7BA0CD 1.0pt;border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><span style='font-family:"Calibri","sans-serif"; 
- color:black'>&nbsp;</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><span style='font-size:10.0pt;font-family:"Calibri","sans-serif"; 
- color:black'>[[JNJ|Johnson &amp; Johnson (JNJ)]]</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><span style='font-size:10.0pt;font-family:"Calibri","sans-serif"; 
- color:black'>[[PFE|Pfizer (PFE)]]</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><span style='font-size:10.0pt;font-family:"Calibri","sans-serif"; 
- color:black'>[[NVS|Novartis (NVS)]]</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><span style='font-size:10.0pt;font-family:"Calibri","sans-serif"; 
- color:black'>[[ABT|Abbott Laboratories (ABT)]]</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><span style='font-size:10.0pt;font-family:"Calibri","sans-serif"; 
- color:black'>[[MRK|Merck (MRK)]]</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><span style='font-size:10.0pt;font-family:"Calibri","sans-serif"; 
- color:black'>[[BMY|Bristol-Meyers Squibb (BMY)]]</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><span style='font-size:10.0pt;font-family:"Calibri","sans-serif"; 
- color:black'>[[LLY|Eli Lilly (LLY)]]</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><span style='font-size:10.0pt;font-family:"Calibri","sans-serif"; 
- color:black'>[[AMGN|Amgen (AMGN)]]</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><span style='font-size:10.0pt;font-family:"Calibri","sans-serif"; 
- color:black'>[[GILD|Gilead (GILD)]]</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><span style='font-size:10.0pt;font-family:"Calibri","sans-serif"; 
- color:black'>[[AstraZeneca (AZN)]]</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><span style='font-size:10.0pt;font-family:"Calibri","sans-serif"; 
- color:black'>[[RHHBY|Roche (RHHBY)]]</span></p> 
- </td> 
- </tr> 
- <tr> 
- <td width=878 colspan=13 valign=top style='width:9.15in;border:solid #7BA0CD 1.0pt; 
- border-top:none;background:#4F81BD;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><b><span style='font-size:11.0pt;font-family:"Calibri","sans-serif"; 
- color:white'>Revenue (in billions of USD)</span></b></p> 
- </td> 
- </tr> 
- <tr> 
- <td width=139 valign=top style='width:1.45in;border-top:none;border-left: 
- solid #7BA0CD 1.0pt;border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><span style='font-size:10.0pt;font-family:"Calibri","sans-serif"; 
- color:black'>Total Revenue</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$61.9</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$50.0</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$44.3</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$30.8</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$27.4</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$18.8</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$21.8</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$14.6</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$7.0</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$32.8</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$49.1</span></p> 
- </td> 
- </tr> 
- <tr> 
- <td width=139 valign=top style='width:1.45in;border-top:none;border-left: 
- solid #7BA0CD 1.0pt;border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><span style='font-size:10.0pt;font-family:"Calibri","sans-serif"; 
- color:black'>Gross Profit</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$43.5</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$41.1</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$32.1</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$17.6</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$18.4</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$13.7</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$17.6</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$12.6</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$5.4</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$27.2</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$34.4</span></p> 
- </td> 
- </tr> 
- <tr> 
- <td width=139 valign=top style='width:1.45in;border-top:none;border-left: 
- solid #7BA0CD 1.0pt;border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><span style='font-size:10.0pt;font-family:"Calibri","sans-serif"; 
- color:black'>Revenue Growth from 2008</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>-2.9%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>3.5%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>4.0%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>4.2%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>15.0%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>6.2%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>7.2%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>-2.4%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>31.4%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>3.8%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>7.5%</span></p> 
- </td> 
- </tr> 
- <tr> 
- <td width=878 colspan=13 valign=top style='width:9.15in;border:solid #7BA0CD 1.0pt; 
- border-top:none;background:#4F81BD;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><b><span style='font-size:11.0pt;font-family:"Calibri","sans-serif"; 
- color:white'>Income</span></b></p> 
- </td> 
- </tr> 
- <tr> 
- <td width=139 valign=top style='width:1.45in;border-top:none;border-left: 
- solid #7BA0CD 1.0pt;border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><span style='font-size:10.0pt;font-family:"Calibri","sans-serif"; 
- color:black'>Net Income</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$12.3</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$8.6</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$8.4</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$5.8</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$12.9</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$10.6</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$4.3</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$4.6</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$2.6</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$7.5</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$7.8</span></p> 
- </td> 
- </tr> 
- <tr> 
- <td width=139 valign=top style='width:1.45in;border-top:none;border-left: 
- solid #7BA0CD 1.0pt;border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><span style='font-size:10.0pt;font-family:"Calibri","sans-serif"; 
- color:black'>Net Profit Margin</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>19.8%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>17.3%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>19.0%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>18.7%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>47.0%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>56.4%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>19.8</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>31.5%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>37.6%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>22.9%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>15.9%</span></p> 
- </td> 
- </tr> 
- <tr> 
- <td width=139 valign=top style='width:1.45in;border-top:none;border-left: 
- solid #7BA0CD 1.0pt;border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><span style='font-size:10.0pt;font-family:"Calibri","sans-serif"; 
- color:black'>Operating Income</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$15.8</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$10.8</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$10.0</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$6.2</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$15.3</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$5.6</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$5.4</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$5.5</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$3.5</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>-$11.5</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- background:#D3DFEE;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$11.9</span></p> 
- </td> 
- </tr> 
- <tr> 
- <td width=139 valign=top style='width:1.45in;border-top:none;border-left: 
- solid #7BA0CD 1.0pt;border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><span style='font-size:10.0pt;font-family:"Calibri","sans-serif"; 
- color:black'>Diluted EPS Growth from 2008</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>-3.7%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>2.5%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>3.7%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>21.8%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>55.6%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>20.7%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>NA</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>19.6%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>36.9%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>23.6%</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>-11.8%</span></p> 
- </td> 
- </tr> 
- <tr> 
- <td width=878 colspan=13 valign=top style='width:9.15in;border:solid #7BA0CD 1.0pt; 
- border-top:none;background:#4F81BD;padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><b><span style='font-size:11.0pt;font-family:"Calibri","sans-serif"; 
- color:white'>Other</span></b></p> 
- </td> 
- </tr> 
- <tr> 
- <td width=139 valign=top style='width:1.45in;border-top:none;border-left: 
- solid #7BA0CD 1.0pt;border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal><span style='font-size:10.0pt;font-family:"Calibri","sans-serif"; 
- color:black'>R&D Spending</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$7.0</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$7.8</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$7.5</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$2.7</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$5.9</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$5.1</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$4.3</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$2.9</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$0.9</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$4.4</span></p> 
- </td> 
- <td width=62 valign=top style='width:46.2pt;border-top:none;border-left:none; 
- border-bottom:solid #7BA0CD 1.0pt;border-right:solid windowtext 1.0pt; 
- padding:0in 5.4pt 0in 5.4pt'> 
- <p class=MsoNormal align=right style='text-align:right'><span 
- style='font-size:10.0pt;font-family:"Calibri","sans-serif";color:black'>$9.9</span></p> 
- </td> 
- </tr> 
-</table> 
-</center> 
- 
-{{clr}} 
==References== ==References==

Revision as of 21:17, May 1, 2011


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 5.1 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]
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