Financial Analysis and Valuation of GlaxoSmithKline Company
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Introduction
1.1 Overview of the UK Market.
The UK economy is a highly developed market. It also relates to favors all the markets in terms of its policies. In terms of its gross domestic product (GDP) the United Kingdom holds position 6 in the world’s national economy. Due to the consumption of economic activities by the public and private economic activities. This resulted in high growth in the year 2002. (Oyegoke, A. S. (2006). Bringing with its modernization of the essential services, such as the health sectors, education, and also public transports. The market was able to achieve its inflation targets from the low-interest rates and the monetary policies. In instances where they impose low mortgage interests, more households were encouraged to borrow and spend. The market has also appeared in the ninth position in purchasing power parity (PPP). Being the most globalized economy, it composed of countries such as England, North Ireland, and Wales.
The IMF forecasts that the economy GDP is expected to depreciate by -6.5% in 2020 and appreciate by 4% come 2021. These changes are brought up by the current Covid-19 pandemic. For the past 2 years, the amount invested in businesses has depreciated. Slow growth in public and debt and income has dampened the consumption rates. The UK was the tenth largest goods exporter in the year 2016, and the sixth-largest good importer the same year. The UK has many industries, this includes the Aerospace Industry in Britain, which is the second aerospace industry nationally. The pharmaceutical industry. The market has experienced slow and high growth over the years. In the 1970s the UK market was weaker than many countries, this may be as a result of high unemployment rates and also the double-digit inflation.
1.2 The GLAXOSMITHKLINE Company
This is a company in the Pharmaceutical industry. Other companies in the industry include Merck and Co, The Roche company, The Sanofi company, The Pfizer and Novartis companies. A study by Forbes shows that the GlaxoSmithKline pharmaceutical company when ranked with the other companies appears in the 6th position in 2019. The company has its headquarters in Brentford England UK its operations are based on the USA (Shang, J.et al (2008). The company has around USSD107 billion market capitalization as in 2016. Making it to be the fourth-largest company in the London stock exchange. The company has $35 billion in sales making it to be the second-largest pharmaceutical company. As the $35 billion accounts for 7% of the total pharmaceutical sales in the world. The company has been successful in producing many vaccines, this includes the first malaria vaccines in the year 2014. It has also produced vaccines such as pyrimethamine, mercaptopurine, and amoxicillin.
The company has its other headquarter in Pittsburg in North America where it has its 36% of sales. (Shang, J.et al (2008). Around $7 billion of GlaxoSmithKline pharmaceutical company turnovers comes from, the consumer healthcare products such as the Over the Counter (OTC), the nutritional health care drinks, and the oral care products, all of these tops in the market. OTC medicines consist of products such as Nicorette, Tums, and Contac. While the oral care comprises of Aquafresh, Sensodyne, and Polident brand. The major nutritional drink from the GSK company is the Horlicks. Pfizer, Colgate-Palmolive, Johnson, Unilever, and Wyeth are the major competitors of the GSK company in the consumer healthcare market. (Shang, J.et al (2008). The company’s stock levels are measured in the Weeks Forward Coverage (WFC). The forecasted number of weeks as a result of the company’s inventory. It is usually based on the 6-mont forecasted demand.
1.3 Peer Group/ The main competitors of GLAXOSMITHKLINE Company
20-30% of the existing products are replaced by the new products produced every year. There are four plants in the companies supply chain, these are; contractors not exceeding 30, two facilities for co-packing, four regional distributions centers (RDC). It estimated that within a year around 80,000 0f customer orders are received by the company. The company also ships 20million cases of products. There are many competitors of the company, but the GSK company with its fair profits maintains its higher inventory levels. High inventory levels are disadvantageous as it represents an investment with low returns. Hence it is always important to maintain low inventory levels to save on costs. The Novartis company being the main competitor of GSK company. Sold its vaccine business to the GSK company, the GSK company also sold its cancer businesses to the Novartis company. Other competitors of GSK company are; the Teva Pharmaceuticals (TEVA), the Sanofi companies, and the Pfizer company.
The setup costs and the research and development budgets, in the health care companies. This makes more pharmaceutical companies to have debts in their balance shits. Pfizer becomes one of the largest pharmaceutical company after it acquired the Warner-Lambert company, in 2000. (Voiculet, A. (2014). The company’s income in Brazil, Turkey, Russia, and China increased by 10% in the year 2013. Novartis company is on a high level in terms of its sales abroad. In 2004 it undergoes a significant product portfolio change this was for them to facilitate the selling of some businesses and acquisition of others. Sanofi company is also in the process of acquiring the Aventis SA company. With an estimated budget of 25 billion Dollars as by 2004. This will lead to the creation of the most powerful pharmaceutical company. This happens when Europe medicine manufacturers are in difficult moments.
The Merck and Co company’s sales also increased by 11% in 2013 whereas the US decreased by 7% most of the medicines were sold by the manufacturer of the generic product. Many of the companies in the pharmaceutical industry has been successful. This has been made possible by the high investment in the scientific research sectors. The Merck company has stimulated the war against AIDS and Pfizer, has started the research to increase the human brain performances, this comes immediately after they launched the Viagra Pills in the markets. GlaxoSmithKline led all the pharmaceutical companies, having around 75 billion market values.
References
Oyegoke, A. S. (2006). Construction industry overview in the UK, US, Japan, and Finland: a Shang, J., Tadikamalla, P. R., Kirsch, L. J., & Brown, L. (2008).
A decision support system for managing inventory at GlaxoSmithKline. Decision Support Systems, 46(1), 1-13. comparative analysis. Journal of Construction Research, 7(01n02), 13-31.
Voiculet, A. (2014). Competition among Transnational Companies in the Pharmaceutical Industry. Studia Universitatis Vasile Goldiş, Arad-Seria Ştiinţe Economice, 24(3), 47-52.