GLAXO - GlaxoSmithKline (Pakistan) Limited

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Apr 11, 2017
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Foundation Albert
GLAXO Analyst Briefing Takeaways
22 November 2019


GlaxosmithKline Pakistan Limited (GLAXO PA) held its Analyst briefing today to discuss financial performance of the company along with its future prospects. Following are the key takeaways.

To highlight, the company is not in our formal coverage.

Impact

  • Company's profitability has increased by 71/170% YoY/QoQ in 3QCY19. Management attributes increase inprofitability to (1) better gross margins due to cheap procurement of raw material in 2QCY19, (3) higher otherincome due to increased promotional allowance received from GSK group, (3) lower effective tax rate despitereversal of tax credit, and (4) 35% decline in advertising and sales promotion expense.
  • Management has also disclosed that company plant remained closed for three weeks in July 2019 due to implementation of SAP. In order to fulfill shortfall due to plant closure in July, GLAXO had already built its inventory levels in early 2QCY19 when exchange rate was lower hence witnessed higher margins in 3QCY19.
  • To highlight, in order to comply with DRAP's instructions regarding detection of genotoxic nitrosamine in ranitidine products, GLAXO has recalled all medicines of Zantac from retailers and distributors and booked provision of Rs223.9 NN in 9MCY19.
  • Management has also disclosed information about its product portfolio and shared that (1) company currently holds 12.4% market share in local pharmaceutical market by value, and (2) out of the top 20 medicines sold inPakistan, GLAXO has 6/3 medicines by volume/value.
  • Furthermore, on distribution front management has disclosed that GLAXO currently have one of the largest distribution network in pharmaceutical sector in Pakistan. Company's distribution channel includes two national level distributors, 31 regional trade distributors, and 160 retail outlets in Pakistan.
  • Moreover, on sales to GlaxosmithKline Consumer Healthcare Pakistan Limited (GSKCH) (Rs 3.2bn in 9MCY19), management has said that these sales will be eliminated from GLAXO books in nearby future due to direct dealings between GSKCH and toll manufacturing company.
Outlook

The company is not in our formal coverage. We expect company's profitability to improve going forward due to (1) ongoing crackdown against counterfeit medicines, (2) better incentives under drug policy 2019, and (3) govt incentives for general public under sehat insaf card scheme.
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