GlaxoSmithKline plc: Recent Developments, Dividend Policy, Capital Structure, and Ratio Analysis

GlaxoSmithKline plc (London Stock exchange)

Contents
INTRODUCTION.....................................................................................................................................3
Part (a).......................................................................................................................................................3
Part (b).......................................................................................................................................................5
Part (c)........................................................................................................................................................8
CONCLUSION........................................................................................................................................14
REFERENCES........................................................................................................................................15

INTRODUCTION
The report is based GlaxoSmithKline plc which is a UK based company and produce a range of
prescription medicines. Basically, it deals in healthcare sector by providing medicines at higher
portfolio of products. This company was founded in year 2000 and operates its operations at
global level (About GlaxoSmithKline plc, 2019). The goal of this company is to become world’s
most innovative and effective health care company. This company is listed in London stock
exchange and its headquarter is in Brent ford, England. The current share price of company is of
1,295.59 GBX (as on 7th of April, 2021).
Part (a)
The international environment is unpredictable and there can be any factor or issue which may
lead to a recent development. In last few years a range of changes have been occurred in
international market. Below some two recent developmentsare mentioned which can affect to
chosen company:
GlaxoSmithKline and Pfizer Joint Venture -
GlaxoSmithKline is a British pharmaceuticals company which has headquarter in London. It is
established in 2000 by merger of Glaxo Welcome and smith Kline Beecham. GlaxoSmithKline
was world's sixth largest pharmaceuticals company in Forbes 2019 after joint venture with
Pfizer. On the other hand, Pfizer is an American multinational pharmaceuticals company. It is
established by Charles Pfizer and Charles F. Erhard in 1849. Pfizer's headquarter is in
Manhattan. It produces and develops medicines and vaccines for wide range of medical
disciplines. Covid-19 Vaccine also developed by Pfizer in conjunction with German company
Biotech.
On December 19, 2018 Pfizer announced acquisition with UK pharma giant GlaxoSmithKline.
In this joint venture Pfizer had 32% equity stake and GlaxoSmithKline had 68% equity stake.
Sales target of this joint venture is to be $12.7Billion. This global deal was not having any
impact on Indian businesses as major brands sold in India were not part of this joint venture.
Impact on GlaxoSmithKline after Pfizer Joint Venture -

This joint venture expected to generate annual cost saving of $0.5 billion by 2022. Expected cash
cost is of $0.9 billion. To cover this cash cost planned divestment is of $1 billion. More than
25% of cost saving is intended to be reinvested in the businesses that supports invention and
other growth opportunities. Overall joint venture targeted operating margin of 20% by 2022.
This joint venture is for only three years. After three years GlaxoSmithKline intends to separate
this joint venture via a demerger of its equity interest and a listing of GlaxoSmithKline consumer
healthcare on the UK equity market.
GlaxoSmithKline did not change its dividend policy after the joint venture with Pfizer. It
continues expect to pay 80 pence per share same as in 2018 (About Pfizer and its impact 2020).
Covid-19 impact on GlaxoSmithKline-
Lock down imposed by Covid-19 disease caused disruptions in all sectors except
pharmaceuticals industry. Pharmaceuticals industry has positive impact and has growth on
overall basis. Market expectations also indicate the same thing as 20 to 30 percent stocks of
many pharma companies has risen due to covid-19. In spite of having positive impact pharma
companies have negative impacts too which are as follows-
 Manufacturing units are not working at full utilization due to unavailability of staff.
 Disrupted supply of raw materials.
 Less sales generation as marketing staff is unable to conduct in-person sales because they
were used to in pre-covid scenario.
 Absence of seamless data connectivity with staff is creating issue in day to day work.
Financial Analysis of GlaxoSmithKline-
 In June 2020 GlaxoSmithKline accepted that its profitability and performance impacted
due to pandemic in the first quarter of the fiscal.
 Company had seen slowdown in sales because of some therapeutic areas during the first
quarter.
 Company has seen disruption in supply chain due to lockdown.
 In spite of having all these problems GlaxoSmithKline performed better than 2019.
 Total Revenue of company in 2019 was 33754 million and in 2020 total revenue was
34099 million (About COVID impact, 2019).