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Challenges being faced by GSK Pakistan Prepared for: GSK Pakistan Prepared by: Syed Fahad Ehsan

April 2016

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Agenda

•  Setting the Context

•  Internal Analysis

•  External Analysis

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Setting the Context

Greatest Challenge

Must Get right Put people first

Change ourselves and industry

Only way forward -Change

Help people and together go the Extra mile

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Setting the Context

• GlaxoSmithKline Pakistan Limited created through a merger of SmithKline and French of Pakistan Limited, Beecham Pakistan (Private) Limited and Glaxo Wellcome (Pakistan) Limited on January 1st, 200, currently standing as the largest pharmaceutical company in Pakistan

Strategic Priorities

•  Grow a diversified, global business

•  Deliver more products of value

•  Create a culture of individual empowerment

•  Simplify the operating model

•  Building trust

What is GSK being up to? •  2001: launches anti depressant :seroxal” •  2002: Launch of Seretide (drug managing asthma) •  2003: Launch of Varilrix (chickenpox) & Havrix

(hepatitis) vaccines •  2004: Launch manufacturing of Sensodyne •  2005: Excellence award for “Occupational safety &

health” •  2006: Launch of Rotarix vaccine for diarrhoea •  2007: Launch of Avodart •  2008: Supplies 71 million does of vaccines polio to

Pakistan government •  2009: Acquires Bristol-Myers Squibb business and

Stiefel laboratories •  2010:Launches Tykerb oral therapy for breast cancer

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Agenda

•  Setting the Context

•  Internal Analysis

•  External Analysis

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Where is the 59% increase in net income coming from? HYPOTHESIS FORMATION

Source: Finance

Net Income Figure in Rs. Million

1,1401,326

1,062

1,687 -20%

+59%

+16%

2011 2014 2012 2013

Net Income/Profit After Tax

•  Is the price increasing or decreasing?

•  Volume of sales increasing or decreasing?

•  Is cost of sold decreasing? •  Efficiencies?

21,75023,14925,23027,882

15,93117,10419,00220,537

+11% +6%

2013 2012

+9%

2011 2014

+11% +8%

+7%

Net sales Cost of goods

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For some brands there is price increase while for other s increase is not observed

HYPOTHESIS FORMATION PRICING

1012 101250

180

8282120120

75

130

7075 9089

180178

+260%

2013 2014

+7%

+20%

+20%

+73%

Panadol Extra 10 units Zantac 300-10 units

Augmentin 375mg -6 units Panadol 10 units Augmentin 625mg-6 units Augmentin Infant Drops 20 ml

Augmentin Syrup 35 ml Zantac 150 -10 units

Augmentin 1gm-6 units

? Majority of the increase in Net Income is coming from Efficiencies rather than natural growth of the business

•  Figure in Rs.

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GSK has been able to increase efficiencies UNDERSTANDING EFFICIENCIES

88

6

9

11

-3

6

-3-2-1012345678910

2014 2013 2012 2011

Operating leverage ratio ROCE • ROCE: In 2014 GSK has been able to increase profitability and efficiency with the employed capital

• Assuming GSK has gained efficiencies through restructuring, this means fixed cost is higher than variable cost hence resulting in increase in sales and higher profitsà as observed through higher operating ratio i.e. good marketing efforts boosting sales might be a reason.

Key highlights

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There is a decline in GSK’s economic value created on its investment - Profit maximization

UNDERSTANDING PROFIT MAXIMIZATION

3,3873,384

2,782

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

2,800

3,000

3,200

3,400

1,098

2011 2012 2014 2013

This might be because the different financial instrument to finance the investment is high i.e. less use of debt to fund operations

RS Million Ecomonic Value Added

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Agenda

•  Setting the Context

•  Internal Analysis

•  External Analysis

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Economic, Political & Security challenges

•  Widespread sectarian violence and terrorism threats

•  Bureaucratic hurdles when interacting with government

•  Currently ranks 127th out of 177 countries in Transparency International’s

Corruption Index with corruption widespread and deeply entrenched in the

system

•  Weak infrastructure and power shortages

•  infrastructure bottlenecks, shortages in oil and gas supply, insufficient

transport systems and a lack of State capacity to provide basic services,

such as potable water, healthcare and education

•  Weak labour law enforcement and lack of enforced IntelIectual Property Rights

(IPR) standards

•  Tensions with India over Kashmir have resurfaced regularly

•  Massive terrorist and security challenges from Taliban and armed criminals

•  Unstable governments

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Closer look at Consumer Health

What strategy would enable GSK to sustain growth

Consumer Health?

Current Market size

What are the challenges for GSK

key brands? Suggested actions

1 2 3

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GSK is the market leader, however there is strong competition from Abbot and Johnson & Johnson

CURRENT MARKET SIZE - CONSUMER HEALTH CARE

Note: The above data has been sourced from Euromonitor

14%

10%

9% Johnson & Johnson Inc

Abbott Laboratories

Others

GSK

68%

Pakistan Total Market Size: USD 86.8 million Health care market consists of :

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The challenge for Panadol WHAT ARE THE CHALLENGES FOR GSK KEY BRANDS?

Patent for (Paracetamol) has expired long ago, however the brand has become a household name(high trust) as a means of alleviating pain.

No subscription required

Re-enforcement through ATL & BTL marketing activities - “It’s My Choice” media campaign

Need for Analgesics: changing lifestyles and higher stress levels. Poor nutrition and low levels of physical activity also contributing to the rise in demand for analgesics.

Where is GSK?

Short Term

Challenge for GSK is to innovate to help people to address the need.

Long Term Measure

Suggested actions

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What is the

challenge for GSK?

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Brand extension Considering other markets ,brand extension has been successful. However before launching market research is advised to understand cannibalization of existing Panadol brand

*Source: Euromonitor

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The challenge for SENSODYNE WHAT ARE THE CHALLENGES FOR GSK KEY BRANDS?

*Source: Euromonitor

Need for Oral Hygiene: Rapid urbanization and increasing awareness of oral hygiene led growth in 2013*. High investment in advertisement and the widespread availability helped the category to generate more value sales. Pakistani consumers are heavily influenced by advertisements and promotional campaigns

Where is GSK?

To grow the brand: need to better understand brand positioning vs. competition

Suggested actions

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What is the

challenge for GSK?

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Consumer research , to understand drivers and barriers of the category and brand positioning

Target segment: Consumers and doctors Re-positioning Sensodyne based research findings

39% 40% 41% 46%

30%29%28% 26%

7%6%

8% 8%8%10%10%9%

10%

4% 4%

45

3%

100

2014

100%

2012

5%

2011

23

4% 5%

3% 4% 4%

2013

30

4% 5%

“With a variant awareness of 83% amongst dentists in just 6 months and a healthy contribution of 8% to total brand sales” GSK 2014 financial statement

Colgate Macleans Others Close-Up Sensodyne Medicam English

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Thank you!