Glaxosmithkline Plc. (gsk) Analysis

GlaxoSmithKline plc. (GSK) Analysis
Xuesen Niu

N12826925

Purpose
To analyze GlaxoSmithKline plc. (GSK).

Background
GlaxoSmithKline plc. (GSK) is a research-based pharmaceutical company headquartered in UK. GSK is listed on LSE and NYSE. GSK’s revenue is driven by 3 business segments pharmaceuticals, vaccines and consumer healthcare products. Pharmaceuticals segment includes products to treat respiratory system, HIV and immune-inflammation. Vaccines segment includes products for meningitis and influenza. Consumer healthcare care segment covers wellness, oral health, nutrition and skin health. In addition to current products on the market, GSK has approximately 40 new research and development pipelines for potential medicines and vaccines in all phases.

Industry and peers
GSK is an industry leading company in Pharmaceuticals, Biotechnology & Life Sciences. Based on my research, majority of the companies in Pharmaceuticals, Biotechnology & Life Sciences industry are in phase I and phase II of clinical trial, and no product has been launched yet; therefore it is not sufficient to compare GSK to industry average. For an industry leading company like GSK, it is more sufficient to compare the company’s portfolio to its peers. According to The Wall Street Journal GSK’s peers are Shire PLC ADR, AstraZeneca PLC ADR, Novartis AG ADR, Sanofi ADR, Merck &Co. Inc., Teva Pharmaceutical Industries Ltd. ADR, Dynavax Technologies Corp., and Innoviva Inc. After considering the size, operation, product and research directions of GSK’s peers, I deem that AstraZeneca PLC ADR(AZN). is the strongest competitors of GSK.

AstraZeneca PLC ADR(AZN) is a science-led biopharmaceutical company headquartered in UK. AZN is listed on LSE, NASDAQ and NYSE. AZN’s revenue is driven by 3 major therapy areas Oncology, Cardiovascular& Metabolic Disease and Respiratory system.

Financial Highlights (profitability, liquidity, risk, and performance)

I based my analysis and comparison using audited 2016 annual reports for GSK and AZN.
EPS - GSK has a lower EPS which means that it has less earning power as of 12/31/2016. 
Current Ratio - is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations. GSK has a higher current ratio meaning that GSK has a greater ability to turn current asset around to covering its obligations.

Quick Ratio – is a company’s ability to meet its short-term obligations with its most liquid assets. GSK has a lower Quick Ratio meaning that within GSK’s asset there are less assets that are cash or cash equivalent comparing to AZN.
Cash Ratio - is the ratio of a company's total cash and cash equivalents to its current liabilities. GSK has a lower cash ratio meaning that it has less cash or cash equivalent comparing to AZN.
Conclusion – Per above information. GSK is a less liquidity company comparing to AZN. 
Gross Margin - represents the percent of total sales revenue that the company retains after incurring the direct costs associated with producing the goods and services it sells. GSK has a lower gross margin which means that company retains less on each dollar of sales.