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TABLE OF CONTENT
Page
Industry Overview
PESTLE Analysis

2

SWOT Analysis

4

Market Share

5

Company Overview
GlaxoSmithKline

5

AstraZeneca

9

Bench Marking

12

Ratio
Profitability Ratio

13

Investment Ratio

17

Conclusion

18

Bibliography

19

Appendix

21

1

INDUSTRY OVERVIEW
PESTLE ANALYSIS
Political:
UK is one of the most powerful nations which yield a lot of influence
...
Pharma industry has always been imaginative and
innovative
...


Economy:
It has been a major boost for the UK’s economy when it was facing a downturn
...
The
government of UK is encouraging the pharmaceutical sector to increase its export in an attempt
to create a balance in its trade by reducing its dependency on financial services
...
It single-handedly provides 70,300
jobs and another 23,000 in research and development
...
Its
2

innovative techniques and medicines had allowed the pharmaceutical sector to generate revenue
of £29 billion
...
(Monaghan, 2014)
...
Its innovative
and effective ways has helped to prevent life-threatening diseases, changing it to long-term
conditions, reduce mortality rate and increase average life expectancy
...
(The UK pharmaceutical industry)
...
This sector is determined to find to innovative ways to improve health
...
2 billion is spent on research and development (R&D) which is the highest
amount spent on R&D compared to any other sector
...
(Monaghan, 2014)

3

Legal:
The Pharma companies along with Biotech and medical device companies are facing compliance
issues
...
The
regulatory bodies are monitoring every small detail of the companies
...
The companies require a new tactic to act
in accordance with the governances and compliances at a global level
...
These
chemicals can be dispersed in the environment through incorrect disposal of medicines and
manufacturing discharges
...
3%

GlaxoSmithKline

5
...
4%

Merck and Co

4
...
8%

Johnson & Johnson

3
...
1%

Abbvie

2
...
2%

Company Overview
GlaxoSmithKline (GSK)
The company started its operations as GlaxoSmithKline (GSK) after the two companies, Glaxo
Wellcome PLC
...
, merged
...
The
merger of Glaxo and Wellcome, SmithKline’s collaboration with the World Health Organisation
(WHO) were few of the major events that took place
...
They have partnered up with
McLaren, Barclays and Save the Children
...
McLaren helps GSK to find the most
efficient and productive way of manufacturing their medicines
...
This helps to reduce the cost and time of developing new medicines
...
Barclays provides an opportunity of reaching a population that cannot afford
healthcare and medicines
...
(Barclays partnership)
...
Allying with Save the
Children, GSK is trying to develop medicines and foods that are child friendly and contains the
nutrition’s needed for a child, increasing the availability of vaccines and training people to
reduce child mortality rate
...
This was done with the
purpose of increasing the value of their products and services to their customer, helping them to
achieve maximum utility
...
T

...
AstraZeneca is the second larges pharmaceutical
its
est
company in UK
...
The takeo
eover
eover bid was £70
billion which the company fough vigorously
...
(Pfizer and AstraZ
raZeneca in fresh
acquisition deals, 2015)

SWOT Analysis

Strength:
Excellent R&D Departmen
partment
Products variety
Global reach

Opportunities:
nities:
Emerging markets
Increasing ageing populatio
population

Weaknesses:
Discontinuation of products
oducts
Legal proceedings affect company
compan
image

Threats:
High competition level
Regulationa and governance issues
nce issue
Issues
Threat of copycat drug
(Ph
Pharma Company)

9

INCOME STATEMENT FOR THE YEAR ENDED AT 31ST DECEMBER
2013
2014
Revenue
16,450
15,850
Cost of Sales
(3,366)
(3,548)
Gross Profit
13,084
12,302
Distribution Cost
(196)
(197)
Research and development
(3,084)
(3,389)
Selling, General and Adminstration
(7,809)
(7,896)
Other Operationg Income
381
478
Operating Profit
2,375
1,298
Finance income
32
47
Finance Expense
(317)
(585)
Share of after Tax losses in Joint Venture
Profit before Taxation
Taxation
Profit after Taxation

2,090
(445)
1,645

BALANCE SHEET AS AT 31ST DECEMBER
2013

(4)
757
(7)
750

2014

Non-current Assets
Property, Plant and Equipment
Goodwill
Intangible Assets
Investments in joint venture
Other investments
Derivative financial instruments
Other receivables
Deferred tax assets
TOTAL NON-CURRENT ASSETS

3,540
6,072
9,763
171
222
1,136
733
21,636

3,869
7,435
13,506
38
323
299
716
785
26,970

Current Assets
Inventories
Trade and other receivables
Other investments
Derivative financial instruments
Income tax receivables
Cash and cash equivalents
TOTAL CURRENT ASSETS
TOTAL ASSETS

1,138
4,696
474
24
294
5,493
12,120
33,756

1,245
4,596
505
13
209
4,041
10,610
37,580
10

Current Liabilities
Interest-bearing Loans and borrowings
Trade and other payables
Derivative financial instruments
Provisions
Income tax payables
TOTAL CURRENT LIABILITIES

1,079
6,256
1
...
00%
90
...
00%
70
...
77%
63
...
00%
50
...
11%

40
...
23%

30
...
00%
10
...
00%
Non Current Assets to Total
Assets

1
...
67

1
...
40
1
...
19

1
...
80

AstraZeneca

0
...
32

0
...
22

0
...
00
Capital Employed to Revenue

COGS to Revenue

It can be seen from the graphs that the capital structure of the two companies are similar

12

RATIO
P
PROFITABILITY RATIO
Ratios

Formula

Gross profit margin





∗ 100




Net profit
Percentage
Operating Expenses
enses
to Sales

∗ 100




Return on Capital
Employed

∗ 100




∗ 100

Gross Profit margin
2013
67
...
0%
80%
80
...
6%

78%
68%

60
...
0%

AstraZenec
traZeneca

20
...
0%
2013

2014

In 2014, GSK earned £68 of gros profit for every £100 of sales
...
In 2014, the sales va
value fell to £23006m from £26505m; however, cost of sales fell
r,
with a higher percentage which re
resulted in an increase in gross profit margin by 0
...

y0

13

On the other hand, AstraZeneca gross profit margin fell by 2% compared to 2013
...

Even though the AstraZeneca ex
experienced a fall in their gross profit margin, their ratio is still
,t
better than GSK
...
For both the compan
anies, the net profit has fallen drastically
...

Both the companies have failed t manage its expenses properly
...
On th other hand AstraZeneca’s financial expense has been twice as
the
eh
much compared to 2013
...


14

Opera
Operating Expense to sales percentage
2013
47%

51%

67%

GSK
AstraZeneca

2014
72%

Opera
Operating Expense to Sales
80%

72%
67%

70%
60%
50%

47%

51%

40%

GSK

30%

AstraZenec
traZeneca

20%
10%
0%
2013

2014

In 2014, GSK has spent £51 on operating expenses for every £100 sales, wher
n
ereas AstraZeneca
has £72 for every £100 of sales
...

ed
...
For GSK
the fall in ratio is caused by the f in sales revenue as operating revenue remai
e fall
ained more or less
constant
...

ating
Looking at the figures it can be said that AstraZeneca is better off, however AstraZeneca is
er,
facing a hard time managing thei expenses whereas GSK’s only problem is a reduction in sales
...

Therefore, it is difficult to say wh one is better
...
The returned has decreased for
ha
shareholders of both the compan
anies
...
However, percentage wise, the fall as been pretty much equal
...

percentage is similar for both the companies, that is around 50%
...
However, the fall
ll

...
On the other hand,
ely
n
AstraZeneca’s operating profit f and their capital employed increased which resulted in the
t fell
ich
worsening of the ratio
...


16

Investment Ratios
Ratios

Formula

Earnings per Share
(EPS)



−

...


Earnings Yield

"
Price Earnings Ratio
(PE)

%

Return on Equity

'





&

ℎ

−

"

ℎ
ℎ
"

ℎ

Earnings per Share
2013
GSK
1
...
31

∗ 100
ℎ

(

"
)

2014
0
...
6

In 2014, GSK’s and AstraZeneca’s common shareholders have earned £ 0
...
60for
every share they bought
...
Net profit has decreased, that’s why EPS
has fallen for both the companies significantly
...


Price Earnings Ratio
2013
GSK
14
...
66

2014
24
...
10

GSK
AstraZeneca

Earnings Yield
2013
6
...
54%

2014
4
...
15%

In 2014, the shareholders of GSK and AstraZeneca were willing to pay £24
...
10,
respectively, for every pound of reported earnings
...
As for
AstraZeneca, the market price of the shares rose and EPS fell, which resulted in an increase in P/
ratio
...


Return on Equity
2013
GSK
78%
AstraZen
AstraZeneca
12%

2014
65%
6%

Return on Equity
90%
80%

78%
65%

70%
60%
50%

GSK

40%

AstraZeneca

30%
20%

12%
6%

10%
0%
2013

2014

In 2014, the shareholders of GS and AstraZeneca have earned £65 and £6, respectively, for
SK
6,
every £100 they invested in the companies
...

e
d
AstraZeneca had a rather sharp fa
fall
...

the

Conclusion
In terms of profitability it can be seen that GSK and AstraZeneca’s ratio are very close, in most
ve
cases
...
In t
terms of investment ratios, most ratios are pret similar
...
Based on these values it can be
way
e
deduced that GSK is better comp
pany for investing
...
In order to get a better picture
more time-series and cross-sectional data will required
...

However, based on the values used in this report it can be deduced that GSK is better company
for investing
...
(2014, November 7)
...
Retrieved from
BBC : http://www
...
com/news/business-29659537
Barclays partnership
...
d
...
gsk
...
London: Association of the British Pharmaceutical Industry
...
(n
...
Retrieved from PWC: http://www
...
co
...
jhtml
McLaren Partnership
...
d
...
gsk
...
(2014, April 22)
...

Retrieved from The Guardian: http://www
...
com/business/2014/apr/22/pharmaceutical-ukresearch-and-development-employment
Pfizer and AstraZeneca in fresh acquisition deals
...
Retrieved from The Guardian:
http://www
...
com/business/2015/feb/05/pfizer-astrazeneca-financial-performance-usviagra-hospira-actavis
Pharma Company
...
d
...
mbaskool
...
html
Pharmaceuticals in the Environment (PIE)
...
d
...
pfizer
...
(n
...
Retrieved from GSK: http://www
...
com/en-gb/aboutus/corporate-partnerships/save-the-children-partnership/
19

Strategic Analysis of Glaxosmithkline
...
d
...
com/journal/2014/05/strategic-swot-five-forces-analysis-of-glaxosmithkline/

20

Appendix A
Gross profit Margin
GSK
2013
17920
∗ 100 = 67
...
1
5342
2014
2831
= 0
...
3
1190
2014
750
=
...
1
∗ 100 = 6
...
12
2014
0
...
16%
13
...
31
∗ 100 = 11
...
35
2014
0
...
14%
14
...
12
= 14
...
1
2014
13
...
01

...
35
= 8
...
31
2014
14
...
10
0
...
25
Share Capital
Number of share

2013
315
315
= 1190
0
...
25

Share Price:

27

The price was £3574 in 31st December 2013 and £4555 in 31st December 2014
...

Price per share 2013: £11
...
46

28



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