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GlaxoSmithKline (PSX: GLAXO) was established as a limited liability company. It was set up through a merger of three companies: SmithKline and French of Pakistan Limited, Beecham Pakistan (Private) Limited and Glaxo Wellcome (Pakistan) Limited. It has two business divisions; one refers to prescription drugs and vaccines, while the consumer healthcare division entails OTC medicines, oral care and nutritional care.

Shareholding pattern

As at December 31, 2021, over 82 percent shares are owned by the associated companies, undertakings and related parties. This category solely includes S.R.One International B.V. The local general public holds 6 percent shares, followed by over 3 percent in each of the following: banks, DFIs, NBFIs, and insurance companies. The directors, CEO, their spouses and minor children hold a negligible share while the remaining roughly 5 percent shares are with the rest of the shareholder categories.

Historical operational performance

The company has mostly seen a growing topline with the exception of CY14 and fairly recently in CY20. Profit margins in the last six years have been fairly stable, with a slight incline observed in CY21.

Revenue in CY18 witnessed a growth of close to 4 percent to reach Rs 34 billion in value terms. This was attributed to growth in the following: antibiotics, dermatology, and analgesics. In addition, Rs 4 billion of total sales were made to GSK Consumer Healthcare. During the year, the company globally launched Augmenting tablets in Dessiflex Blister packaging. On the other hand, cost of production increased to over 75 percent of revenue, up from last year’s 73.5 percent. This was due to the general inflationary pressures and currency devaluation. Thus, gross margin reduced to 24.7 percent for the year. However, net margin was marginally higher at 9.6 percent, compared to 9.1 percent in CY17. This was due to an increase in other income that came from promotional allowance.

Topline growth improved in CY19 as it posted a growth of 7.6 percent to reach Rs 36.6 billion in value terms. This was again driven by antibiotics, dermatology and analgesics therapy divisions. Despite the rise in revenue, gross margin was recorded at a lower 21.1 percent as cost of production continued to rise to consume nearly 79 percent of revenue. This was due to currency devaluation that made imported raw materials expensive. The impact was also seen on locally sourced raw materials. Finance expense also increased due to rising interest rates, but the fall net margin was contained as it was recorded at 8.3 percent due to a reduction in operating expenses as a share in revenue, coupled with a sustained rise in other income. The latter was a result of a promotional allowance of Rs 2 billion from the parent company for investment in brands.

After rising for five years consecutively, revenue in CY20 contracted by 4 percent. A major decline was seen in sales to GSK Consumer Healthcare that was recorded at Rs 1.2 billion for the year, compared to around Rs 4 billion seen in the previous years. This was due to market authorization rights being transferred to GSK Consumer Healthcare. Aside from this, the core pharmaceutical business saw a growth of 6 percent. Cost of production reduced marginally to 78.5 percent of revenue, keeping gross margin close to 21 percent. However, there was some improvement in net margin as it increased to 9.6 percent due to notable reduction in distribution expense that was a result of using digital channels to connect with health professionals. In addition, other income continued to support the bottomline that was recorded at the highest thus far at almost Rs 3.4 billion.

Revenue bounced back in CY21 as it grew by 4.5 percent to reach an all-time high of Rs 36.7 billion. Sales to GSK Consumer Healthcare reduced year on year to Rs 0.9 billion, compared to Rs 1.2 billion in the previous year. Other than that, sales posted a growth of 5 percent that was mainly driven by dermatology segment. With cost reducing to over 73 percent of revenue, gross margin improved to over 26 percent. This was further supported by other income that was recorded at its highest of Rs 2.5 billion. Of this, a major contributor was promotional allowance of Rs 1.4 billion. Thus, net margin escalated to 14.6 percent with bottomline reaching a peak of Rs 5.3 billion.

Quarterly results and future outlook

Revenue in the first quarter of FY22 was higher by 12 percent year on year. This was attributed to increased activity compared to the same time last year that saw partial lockdowns due to Covid-19 pandemic. In addition, a price increase also contributed to improvement in revenue. In addition, cost of production as a share in revenue also reduced to 74 percent, compared to 75.6 percent in the previous year. Thus, gross margin increased to nearly 26 percent versus 24.4 percent in the previous year. This also trickled to the net margin that was also better year on year at 10.7 percent.

On one side there are factors such as rising health awareness and diagnosis through technology that will benefit the company; however, there are certain challenges such as rising crude oil prices, political instability and the resultant policy inconsistency, and currency devaluation that can create an impediment.


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