Case Study : Glaxosmithkline 's Strategy For Future Development

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3.1. Case study: GlaxoSmithKline. The British pharma giant GlaxoSmithKline’s shares have underperformed the broader pharmaceuticals sector by a staggering 80% over the past 7 years (Ward, 2015). Tim Anderson, an analyst at Bernstein, as cited by Andrew Ward, said the company has been in slow-motion freefall. (Ward, 2015). GlaxoSmithKline has been heavily reliant on its blockbuster Advair asthma medicine for 14 years ever since the product’s launch to deliver a strong revenue stream. Yet, the company’s CEO Sir Andrew Witty, though having been accused by some of failing to replenish the drug portfolio, staunchly adopts the diversification strategy for future development. GSK is set on tapping rising demand for healthcare from billions of…show more content…
Indeed, why divest one of the higher-margin and fastest growing businesses and willingly subject oneself to competition? Yet, GSK is not leaving the pharma sector is not laying down its weapons: the company has received more drug approvals in the past 3 years than any other company (FT 2015). The company still invests 3.5 billion/annum in R&D, which matches the industry average at 15% of sales (FT, 2015). It became the first big drug maker to apply for an FDA approval for a gene therapy treatment to cure Adenosine - a rare childhood disease. This effectively means GSK is strongly investing in its own R&D expertise, as opposed to acquiring niche biotech companies, whilst, simultaneously hedging the risks inherent in developing niche high-priced treatments for a small number of patients. Effectively, GSK is still staying at the cutting edge of medical research, at the same time limiting its exposure to the high-risk, high-reward strategy. As Sir Andrew aptly quoted ‘we leave open the upside potential to be one of the winners from innovation… But it can’t be a one-way bet’ (Ward, 2015) Overall, it seems, the diversification strategy is a viable alternative for big pharmaceutical incumbents. However, it carries with it the inherent risks of dilution of funds and a misalignment of efforts. If diversification is to be successful, a balance needs to be struck between retaining core strengths, identifying

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