Pharmaceutical industry

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Group 6 member:

Thien Ai, Nguyen – 15838

Thi Trang Nhung, Nguyen – 15714

Thi Minh Loan, Doan – 16325

Tran Lam Thao, Tran – 16257

Rhein-waal University of Applied Science

Lecture “Financial Statement Analysis”

WS 2014/15

Prof. Dr. Philipp Schorn

GlaxoSmithKline plc (GSK): - A British multinational Pharmaceutical, Vaccines, Consumer Healthcare and company

- Located in Brentford, London.

- As of March 2014, it was the world's sixth-largest pharmaceutical company after Johnson & Johnson, Novartis, Hoffmann-La Roche, Pfizer, and Sanofi, measured by 2013 revenue.

- Follow differentation strategy, trying to produce various products.

OVERVIEW

- GSK is the company leading in R&D in the world.

- In 2012, £3.9 billion (accounting for 13.1% of total turnover) was spent for R&D with the staff of over 12,500 people researching in this area.

-There are three primary parts that R&D focuses on including Pharmaceuticals, Vaccines and Consumer Healthcare.

- With an effective strategy, R&D brought to the company 13% of internal rate of return in 2013

R&D

PERFORMANCE IN 2013

Profitability Analysis

2009 2010 2011 2012 2013

Gross profit margin 74.0% 73.3% 73.2% 70.1% 67.6%

EBITDA margin 25.1% 8.1% 25.8% 22.9% 22.5%

NOPAT margin 17.4% 4.4% 16.1% 15.5% 17.8%

Net profit margin 20% 7% 20% 18% 21%

Efficiency analysis

GSK AZN JNJ Peers

2011 2012 2013 2011 2012 2013 2011 2012 2013 2011 2012 2013PP&E/Sales 31,9% 33,2% 33,5% 19,1% 21,8% 22,6% 22,7% 23,9% 23,4% 27,50% 27,51% 28,47%

PP&E turnover 3,13 3,01 2,99 5,23 4,59 4,42 4,41 4,18 4,27 3,59 3,51 3,32

R&D/Sales 14,64% 15,01% 14,80% 16,44 18,74 18,75 11,61 11,40 11,47 14,19 14,51 14,05

R&D Turnover 6,83 6,66 6,76 6,08 5,34 5,33 8,61 8,77 8,72 7,05 6,89 7,12 Trade receivables turnover 4,82 4,89 5,76 4,05 3,41 3,34 6,30 6,06 6,11 5,19 5,06 5,07Days’ receivables 74,72 73,67 62,53 90,19 106,89 109,3 57,12 59,43 58,92 71,74 74,03 74,74Inventories turnover 1,90 2,01 2,18 3,41 2,76 2,65 3,44 3,10 2,87 2,86 2,62 2,43Days’ inventories 189,28 178,81 164,99 107,03 132,42 137,72 104,54116,12125,57 138,72 151,01 158,75Trade payables turnover 1,03 1,02 1,05 0,67 0,58 0,53 3,54 3,70 3,64 2,39 2,20 2,25Days’ payables 349,76 351,45 343,25 534,11 615,76 679,32 101,7297,38 98,81 150,64 163,40 160,25Cash Conversion Cycle -85,76 -98,96 -115,73 -336,89 376,45 -432,31 59,95 78,17 85,68 59,81 61,64 73,23

Liquidity analysis

2009 2010 2011 2012 2013

Current ratio

GSK 1.57 1.35 1.16 1.04 1.05

JNJ 1.82 2.05 2.38 1.9 2.2

AZN 1.35 1.5 1.49 1.37 1.27

Industry 1.68 1.67 1.64 1.65 1.71

Quick ratio

GSK 1.20 1.03 0.85 0.73 0.69

JNJ 1.34 1.62 1.88 1.34 1.59

AZN 1.25 1.4 1.37 1.22 1.15

Industry 1.20 1.20 1.22 1.20 1.21

Cash ratio

GSK 0.40 0.40 0.38 0.34 0.34

JNJ 0.73 0.84 1.08 0.61 0.82

AZN 0.56 0.66 0.48 0.55 0.57

Industry 0.41 0.42 0.42 0.44 0.43

Operating cash flow ratio

GSK 0.71 0.55 0.45 0.30 0.53

JNJ 0.76 0.71 0.63 0.63 0.68

AZN 0.67 0.64 0.50 0.50 0.46

Industry 0.63 0.66 0.66 0.60 0.62

Solvency analysis

2009 2010 2011 2012 2013

Liabilities-to-equity

GSK 3.52 3.42 3.83 4.84 5.39

AZN 1.66 1.42 1.27 1.26 1.41

JNJ 0.87 0.82 0.99 0.87 0.79

AVERAGE 1.98 1.72 1.65 1.71 1.55

Net debt-to-equity

GSK 2.14 1.93 2.07 2.72 3.07

AZN 0.11 0.41 0.40 0.43 0.45

JNJ 0.29 0.30 0.34 0.25 0.25

AVERAGE 0.96 0.80 0.73 0.75 0.56

Interest coverage ratio

GSK 11.08 4.80 10.63 9.28 10.16

AZN 10.02 11.63 13.62 9.06 7.60

JNJ 35.93 38.25 22.65 26.89 33.10

Forecast

2014-12 2015-12 2016-12 2017-12 2018-12

Sales 27.128 28.062 29.114 30.119 31.038

Net profit margin (ROS) 20,24% 19,93% 19,37% 19,48% 19,40%

× Asset turnover 0,63 0,63 0,62 0,61 0,61

= Return on assets (ROA) 12,84% 12,55% 12,02% 11,97% 11,90%

× Financial leverage 5,21 5,16 5,39 5,38 5,31

= Return on equity (ROE) 66,86% 64,80% 64,76% 64,40% 63,21%