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A summary and an overview...

A summary and an overview. Marijn G. J. Ford - 29 th November, 2001. Corporate synopsis. GSK plc manufactures, researches, develops and markets pharmaceutical products, vaccinations, OTC medicines and consumer healthcare products Business segments: Pharmaceuticals - 85% ( £15,429bn )

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A summary and an overview...

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  1. A summary and an overview... Marijn G. J. Ford - 29th November, 2001

  2. Corporate synopsis... • GSK plc manufactures, researches, develops and markets pharmaceutical products, vaccinations, OTC medicines and consumer healthcare products • Business segments: • Pharmaceuticals - 85% (£15,429bn) • Consumer Healthcare - 15% (£2,650bn) • Market Capitalisation: £111.6bn • Operates in 70 countries • Products sold in over 140 countries • Major markets: • United States - 50% (£7,705bn) • Europe - 28% (£4,268bn) • Japan - 6% (£832m)

  3. R&D areas of focus • Central Nervous System • Respiratory • Anti-bacterials • Anti-virals • Metabolic & gastro-intestinal • Others • Including Vaccines, Oncology, Cardiovascular and Arthritis

  4. Products: CNS • Main products in the Central Nervous System division

  5. Products: Respiratory • Main products in the Respiratory division

  6. Products: Anti-bacterials • Main products in the Anti-bacterial division

  7. Products: Anti-virals • Main products in the Anti-viral division

  8. Products: Others • Main products in the Metabolic & Gastro-intestinal, Vaccine and Oncology Divisions

  9. Product pipeline • Since the 2000 merger of Glaxo Wellcome and SmithKline Beecham, the clinical phase drug pipeline of GSK is substantial • Several drug candidates from all divisions will be submitted for FDA approval in the next few years • As of March 2000, 30 candidate drugs were in Phase III clinical trials • In total, GSK has 113 candidate drugs in clinical trials • GSK is willing to buy “almost ready” drugs from competitors

  10. Financials: a summary • GSK is enjoying strong growth in both sales and earnings • Analyst estimates for the future predict a continuation of this trend

  11. Sales drivers... • A few key blockbuster drugs are responsible for the majority of GSK’s sales

  12. A new blockbuster? • Seretide/Advair is the first product to be launched by the merged concern • Intense promotional activity surrounded the April 2001 launch in the US: 70,000 prescribers were individually contacted in the 5 days after launch • Seretide/Advair was rewarded with a 12% market share in the huge asthma market after just 12 weeks • After 2 months on the US market, the $100m sales milestone was reached • Seretide/Advair appears to be well on its way to becoming the gold-standard for asthma treatment

  13. Recent Developments • On 21-10-2001, GSK announced the instigation of a £4bn share buy-back which should bolster its share price in the next few months • On 22-11-2001, GSK and Bayer announced an agreement to co-market Vardenafil, Bayer’s new anti-impotence drug. Sales are expected to reach $0.8bn per annum • But, GSK has also announced the termination of development of a phase III drug candidate for type II diabetes

  14. Share performance • Over the last few years, the share price has been fairly stable...

  15. Share performance (cont’d) • Whilst the GSK share price has outperformed FTSE this year...

  16. Share performance (cont’d) • … it has somewhat under-performed the FTSE Pharmaceuticals sector

  17. Share performance (cont’d) • GSK has been trading at an average P/E in the high 30s in recent years

  18. GSK Yield • Dividend yield has remained in the low % range

  19. Recommendations... • The analyst consensus for GSK shares at the moment is a “buy”... Source: www.ft.com

  20. Summary... • GSK is a stable concern with a very promising R&D pipeline and a stable of successful drugs on the market • GSK generates very strong sales and profits at present because of its current product portfolio • The recent merger should lead to some impressive one-off cost savings • Its share price performance has not been especially sexy, but it has been safe • The long-term future looks bright by virtue of its strong product pipeline

  21. Recommendation: • “buy” • especially in times of market uncertainty • GSK will remain highly cash-generative, even during economic downturns • Some of GSK’s new drugs should become blockbusters in the next few years • earnings growth will increase to approx. 15% per annum over the next few years

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