Company Spotlight

MarketWatch: Pharmaceuticals

SWOT Analysis

SWOT Analysis Strengths Strong sales and marketing infrastructure Industry-leading early to mid stage R&D pipeline Robust sales growth forecast for launch portfolio Industry-leading player with regard to implementation of lifecycle management strategies Strong business fundamentals and robust balance sheet Demonstrated ability to drive cost elimination Opportunities Potential for CEDD-inspired R&D pipeline to deliver strong growth beyond 2013 Enhanced vaccine offering Movement into high growth oncology market Movement into biologics, specifically antibodies, segment Potential to increase sales growth in RoW/emerging markets Continued cost elimination Strong cash position facilitates potential M&A
Source: Datamonitor

Weaknesses Mature portfolio of marketed products Lack of blockbuster product launches following creation (via merger) in 2000 Perceived safety concerns relating to key Avandia product franchise High dependence on low growth/highly competitive CNS and respiratory markets Failure of R&D pipeline to deliver initial commercial expectation

Threats Impact of generic erosion to sales generated by key product franchises Further development setbacks impacting late stage R&D pipeline

© Datamonitor, March 2010

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Industry-leading early to mid stage R&D pipeline Having undertaken a significant restructuring of its R&D operations to create its CEDD (Centres of Excellence in Drug Discovery)-led model. GSK retains a robust sales and marketing infrastructure. Industry-leading player with regard to implementation of life-cycle management strategies Another key strength which overlaps with GSK's sales and marketing prowess is its industry-leading position with regard to product lifecycle management which. particularly in the lucrative US market. a key opportunity to drive future growth. in the past. positions GSK as a marketing partner of choice Despite cost elimination strategies in recent years. © Datamonitor. However. sales growth is forecast to be flat through to 2013 due to the exposure of GSK's marketed portfolio to generic competition.Company Spotlight MarketWatch: Pharmaceuticals Strengths Strong sales and marketing infrastructure. March 2010 www. Demonstrated ability to drive cost elimination Further risk of developmental setbacks is also somewhat tempered by the spread of these revenues across a broad number of products. GSK will be reliant on another of its key strengths its demonstrated ability to eliminate excess costs.6 billion by 2013. This will continue to support the leverage of strong sales growth from established brands. despite strong forecast growth from the launch portfolio. Strong business fundamentals and robust balance sheet Control of its cost base which enabled operating profit to grow at a CAGR of 8. has helped to provide some insulation from generic erosion and new growth opportunities. In order to retain operating profitability growth.2% over 2001-07 in line with total revenue growth of 1.datamonitor. GSK is now in possession of the industry's largest early to mid-stage R&D pipeline. a robust balance sheet illustrates that the company has accumulated the necessary funds to undertake future acquisitions. there have been numerous development setbacks and the pipeline has not delivered the commercial impact forecast by GSK at its R&D open day in 2003. rapid uptake of emergent franchises and position GSK as a marketing partner of choice (thereby enhancing the company's commercial outlook with regard to in-licensing). however.com .30 - . In addition. therefore. it retains considerable potential and is forecast to deliver sales of approximately $6. Robust sales growth forecast for launch portfolio Granted.7% is just one element of GSK's strong business fundamentals.

building on strong historical ID presence Within the 2007-13 time period in particular. particularly in light of GSK's 2003 R&D open day. both of which will provide limited sales growth potential over 2007-13 (and beyond). Datamonitor forecasts a significant decline in revenues over the next few years.Company Spotlight MarketWatch: Pharmaceuticals Weaknesses Mature portfolio of marketed products becoming increasingly exposure to generic competition The company is currently in possession of an increasingly mature marketed portfolio of prescription pharmaceuticals.4 billion injection forecast for 2007-13. However.31 - . which will become further exposed to generic competition over 2007-13.to mid-stage R&D pipeline. The legacy of this 'lag' in launches will catch up with the company over 2007-13. Perceived safety concerns relating to key Avandia product franchise The inherent weakness of GSK's mature portfolio and therapeutic positioning has been compounded by the safety concerns that emerged in 2007 associated with the Avandia diabetes franchise. we perceive the lack of commercial impact from the pipeline to date to be a weakness.datamonitor. March 2010 www.com . at which the company made a number of bullish predictions regarding its late stage output that have proven to be considerably wide of the mark. the company's enhanced offering in the vaccines market which can be linked to GSK's historical strength in infectious diseases looks set to provide a notable revenue contribution. Lack of blockbuster product launches following creation (via merger) in 2000 The lack of launch productivity particularly with regard to blockbuster product launches in the period following the creation of GSK in 2000. particularly given the depth and scope of GSK's early. Enhanced vaccine offering. Failure of R&D pipeline to deliver initial commercial expectation Although Datamonitor has chosen to include GSK's R&D pipeline under the umbrella tag of 'strengths'. this franchise represented GSK's second largest product and was forecast to act as a key sales growth driver through to patent expiry in 2012/13. © Datamonitor. Prior to the publication of a study which linked Avandia to a higher incidence of cardiovascular risk. High dependence on low growth/highly competitive CNS and respiratory markets The company has been slow to seek diversification of its marketed portfolio at the therapeutic level. and remains heavily entrenched in the respiratory and CNS markets. in light of these findings and the FDA's requirement that the safety concerns on Avandia's black box warning be heightened. Opportunities Potential for CEDD-inspired R&D pipeline to deliver strong growth beyond 2013 A key opportunity for GSK is the reiteration that its CEDD-structured R&D pipeline holds considerable potential to deliver strong revenue growth beyond the approximately $8.

Threats Impact of generic erosion to sales generated by key product franchises The primary commercial threat faced by GSK over the period 2007-13 is the significant exposure of numerous key product franchises to generic erosion.com . primarily felt beyond 2013. March 2010 www. they would also adversely affect shareholder sentiment regarding the R&D pipeline in light of weaker than predicted output since the 2003 R&D open day.datamonitor. Further development setbacks impacting late stage R&D pipeline The other main threat facing the company is further setbacks to the R&D pipeline. Movement into biologics. Continued cost elimination GSK's strong operating performance and balance sheet for the period 2001-07 indicate that the company remains well positioned to deliver a robust operating performance through to 2013. © Datamonitor. Datamonitor has identified a number of growth opportunities that will potentially be driven by diversification of GSK's existing business. Strong cash position facilitates potential M&A GSK has proven adept at eliminating the surplus costs attached to its operations. specifically antibodies. GSK's clear movement into biologics is also gathering pace and must be recognized as an opportunity of note given the high sales growth rates currently attached to this market. In particular. Such is the extent of the associated revenue decline forecast across the expiry portfolio that it will effectively offset all sales growth forecast to be delivered from both the launch and core portfolios. while an accumulation of cash on its balance sheet provides scope for future acquisitions. In addition to the negative commercial impact that such setbacks would have.32 - . particularly in RoW and emerging markets where GSK has signaled its intent to utilize different strategies such as the marketing of generic pharmaceuticals. Potential to increase sales growth in RoW/emerging markets Diversification-led growth opportunities will also take the form of geographic expansion and enhancement. GSK has proven adept at eliminating the surplus costs attached to its operations.Company Spotlight MarketWatch: Pharmaceuticals Movement into high growth oncology market In line with GSK's recently announced strategic priorities. segment While most likely to have a longer-term commercial impact. despite anticipated downward pressure on revenues.

33 - .gsk. Inc.com .003 Telephone Fax Website Turnover (£m) London ticker Financial year end Employees Major Products & Services alli Amoxil Avandia Corega Daraprim Flixotide FluLaval Lamictal Panadol Retrovir Seretide Zantac Key Competitors Abbott Laboratories AstraZeneca PLC Bristol-Myers Squibb Company Eli Lilly and Company Johnson & Johnson Merck & Co. Novartis AG Pfizer Inc Roche Holding AG Sanofi-Aventis Group Schering-Plough Corporation Wyeth © Datamonitor.352 GSK December 99.Company Spotlight MarketWatch: Pharmaceuticals Major Products & Services Key Facts Address 980 Great West Road Brentford Middlesex TW8 9GS GBR 44 20 8047 5000 44 20 8047 7807 www.. March 2010 www.datamonitor.com 24.

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