Restructuring Strategy for GlaxoSmithKline: Enhancing Competitiveness

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Market and competitor analysis reveal GlaxoSmithKline's challenges in revenue growth and R&D productivity. The case presents a detailed analysis, alternative strategies, and recommendations for restructuring the company into separate entities to improve performance and equity value.

  • GlaxoSmithKline
  • Restructuring
  • Strategy
  • Competitiveness
  • Analysis
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  1. GlaxoSmithKline THE FUTURE OF EMMA WALMSLEY JOHN MOLSON MBA INTERNATIONAL CASE COMPETITION CASE 5 2023

  2. EXECUTIVE SUMMARY Executive summary with the most important elements of the solution. ANALYSIS NEED TO RESTRUCTURE GSK 5 ALTERNATIVES: PRE-SPIN-OFF, POST-SPIN-OFF, ELLIOTT S WISH, 2X NEW ALTERNATIVES ALTERNATIVES RECOMMENDATION 3 SEPARATE ENTITIES 1. HUMAN RESOURCES: RESTRUCTURING 2. PR: JUDGEMENT OF GSK 3. OPERATIONS: TIMETABLE 4. STRATEGY: CONTINGENCY PLAN 5. FINANCE: EFFECTS IMPLEMENTATION IMPACT EQUITY VALUE OF 144 BILL.

  3. EXECUTIVE SUMMARY Executive summary with the most important elements of the solution. ANALYSIS NEED TO RESTRUCTURE GSK 5 ALTERNATIVES: PRE-SPIN-OFF, POST-SPIN-OFF, ELLIOTT S WISH, 2X NEW ALTERNATIVES MAIN CHALLENGE ALTERNATIVES RECOMMENDATION COMPROMISE BETWEEN WALMSLEY AND ELLIOTT 3 SEPARATE ENTITIES 1. HUMAN RESOURCES: RESTRUCTURING 2. PR: JUDGEMENT OF GSK 3. OPERATIONS: TIMETABLE 4. STRATEGY: CONTINGENCY PLAN 5. FINANCE: EFFECTS IMPLEMENTATION IMPACT EQUITY VALUE OF 144 BILL.

  4. 01 ANALYSIS 02 ALTERNATIVES STRUCTURE 03 RECOMMENDATION 04 IMPLEMENTATION 05 IMPACT

  5. 01 ANALYSIS 02 ALTERNATIVES STRUCTURE 03 RECOMMENDATION 04 IMPLEMENTATION 05 IMPACT

  6. MARKET ANALYSIS GSK is behind its competitors due to slowing revenue increase and misguided R&D spendings. SHARE PRICE DEVELOPMENT 200 In FY17 GSK and its competitors had the same share price. 180 178 180 160 In FY20 GSK could reach the level of Pfizer but far behind from AstraZeneca. 140 130 122 120 117 115 87 120 128 118 100 100 90 IN FY21 share price decreased significantly. 97 80 FY17 FY18 FY19 FY20 FY21 AstraZeneca Pfizer GSK GSK is at a significant disadvantage compared to its main competitors.

  7. COMPETITOR ANALYSIS The Pharmaceuticalindustry is drivenby R&D tofindthenew STAR products. R&D PRODUCTIVITY OF GSK 2.5 Prevention is more and more important in the pharmaceutical industry 2.0 1.5 R&D is a key successfactor in the pharmaceutical indsutry 1.0 0.5 The number of new patents is a competitive advantage 2005 1999 2010 2020 2015 GSK is at a significant disadvantage compared to its main competitors regardingR&D.

  8. COMPANY ANALYSIS: REVENUE BY DIVISION The Company's revenues shifted towardsVaccinesand Consumer healthdivision. GKS s revenue by division in 2016 GKS s revenue by division in 2020 Pharma: Specialty medicines 26% 29% Consumer healthcare: OTC 50% 58% 16% 21% Vaccines Pharmaceuticals Vaccines Consumer healthcare Pharmaceuticals Vaccines Consumer healthcare CONCLUSION 2 There was an 8% drop in Pharmaceuticals revenue, a 5% increase in Vaccinesand a 3% increase in Consumer healthcare

  9. COMPANY ANALYSIS: BCG MATRIX Each division performs acceptable, but there is room for improvement . CORE STRENGHTS HIGH Oneof the largestpharmacompany: 7% globalshare V 1 BUSINESS GROWTH 150 countries, 100 000 employees 2 P 20 late stagedrugs 3 ? Ninepowerbrandsin Consumer Healthcare 4 CHALLENGES CH Covid-19 latevaccine Cancerresearch faild 1 2 Of 125 top managers, 100 changed 3 LOW HIGH Dropin shareprice 4 RELATIVE MARKET SHARE

  10. COMPANY ANALYSIS: BCG MATRIX Each division performs acceptable, but there is room for improvement . CORE STRENGHTS HIGH V Oneof the largestpharmacompany: 7% globalshare V 1 BUSINESS GROWTH 150 countries, 100 000 employees 2 P 20 late stagedrugs 3 P ? Ninepowerbrandsin Consumer Healthcare 4 CHALLENGES CH Covid-19 latevaccine Cancerresearch faild 1 2 Of 125 top managers, 100 changed 3 LOW HIGH Dropin shareprice 4 RELATIVE MARKET SHARE

  11. COMPANY ANALYSIS: BCG MATRIX Each division performs acceptable, but there is room for improvement . CORE STRENGHTS HIGH V Oneof the largestpharmacompany: 7% globalshare V CONCLUSION OF THE ANALYSIS 1 BUSINESS GROWTH 150 countries, 100 000 employees 2 P 20 late stagedrugs 3 P ? Ninepowerbrandsin Consumer Healthcare 4 NEED TO RESTRUCTURE GSK CHALLENGES CH Covid-19 latevaccine Cancerresearch faild 1 2 Of 125 top managers, 100 changed 3 LOW HIGH Dropin shareprice 4 RELATIVE MARKET SHARE

  12. 01 ANALYSIS 02 ALTERNATIVES STRUCTURE 03 RECOMMENDATION 04 IMPLEMENTATION 05 IMPACT

  13. DEVELOPMENT OF ALTERNATIVES Based on the analysis, GSK has 5 restructuring alternatives. CONSUMER HEALTHCARE PRE-SPIN-OFF PHARMACEUTICALS VACCINES

  14. DEVELOPMENT OF ALTERNATIVES Based on the analysis, GSK has 5 restructuring alternatives. CONSUMER HEALTHCARE PRE-SPIN-OFF PHARMACEUTICALS VACCINES CONSUMER HEALTHCARE POST-SPIN-OFF PHARMACEUTICALS VACCINES

  15. DEVELOPMENT OF ALTERNATIVES Based on the analysis, GSK has 5 restructuring alternatives. CONSUMER HEALTHCARE PRE-SPIN-OFF PHARMACEUTICALS VACCINES CONSUMER HEALTHCARE POST-SPIN-OFF PHARMACEUTICALS VACCINES CONSUMER HEALTHCARE NEW ALTERNATIVE PHARMACEUTICALS VACCINES

  16. DEVELOPMENT OF ALTERNATIVES Based on the analysis, GSK has 5 restructuring alternatives. CONSUMER HEALTHCARE PRE-SPIN-OFF PHARMACEUTICALS VACCINES CONSUMER HEALTHCARE POST-SPIN-OFF PHARMACEUTICALS VACCINES CONSUMER HEALTHCARE NEW ALTERNATIVE PHARMACEUTICALS VACCINES CONSUMER HEALTHCARE NEW ALTERNATIVE PHARMACEUTICALS VACCINES

  17. DEVELOPMENT OF ALTERNATIVES Based on the analysis, GSK has 5 restructuring alternatives. CONSUMER HEALTHCARE PRE-SPIN-OFF PHARMACEUTICALS VACCINES CONSUMER HEALTHCARE POST-SPIN-OFF PHARMACEUTICALS VACCINES CONSUMER HEALTHCARE NEW ALTERNATIVE PHARMACEUTICALS VACCINES CONSUMER HEALTHCARE NEW ALTERNATIVE PHARMACEUTICALS VACCINES CONSUMER HEALTHCARE ELLIOTT S WISH PHARMACEUTICALS VACCINES

  18. DEVELOPMENT OF ALTERNATIVES Based on the analysis, GSK has 5 restructuring alternatives. CONSUMER HEALTHCARE PHARMACEUTICALS VACCINES CONSUMER HEALTHCARE PHARMACEUTICALS VACCINES IMPORTANT TREND IN HEALTHCARE CONSUMER HEALTHCARE IMPORTANCE OF PREVENTION*: GROWING PHARMACEUTICALS VACCINES *VACCINES ARE THE MOST IMPORTANT SUBSECTOR OF PREVENTION CONSUMER HEALTHCARE PHARMACEUTICALS VACCINES CONSUMER HEALTHCARE PHARMACEUTICALS VACCINES

  19. DEVELOPMENT OF ALTERNATIVES Based on the analysis, GSK has 5 restructuring alternatives. CONSUMER HEALTHCARE PHARMACEUTICALS VACCINES CONSUMER HEALTHCARE PHARMACEUTICALS VACCINES IMPORTANT TREND IN HEALTHCARE CONSUMER HEALTHCARE IMPORTANCE OF PREVENTION*: GROWING PHARMACEUTICALS VACCINES *VACCINES ARE THE MOST IMPORTANT SUBSECTOR OF PREVENTION CONSUMER HEALTHCARE PHARMACEUTICALS VACCINES CONSUMER HEALTHCARE PHARMACEUTICALS VACCINES

  20. DEVELOPMENT OF ALTERNATIVES Based on the analysis, GSK has 5 restructuring alternatives. CONSUMER HEALTHCARE PHARMACEUTICALS VACCINES EQUITY VALUE BASED ON MARKET VALUATION 20,9 BILL. CONSUMER HEALTHCARE PHARMACEUTICALS VACCINES EQUITY VALUE BASED ON FORECASTED CASH-FLOW 24,2 31.4 BILL. CONSUMER HEALTHCARE PHARMACEUTICALS VACCINES CONSUMER HEALTHCARE PHARMACEUTICALS VACCINES GSK COULD SELL THE SEGMENT WITH A DOWNSIDE DISACOUNT CONSUMER HEALTHCARE PHARMACEUTICALS VACCINES

  21. DEVELOPMENT OF ALTERNATIVES Based on the analysis, GSK has 5 restructuring alternatives. CONSUMER HEALTHCARE PHARMACEUTICALS VACCINES EQUITY VALUE BASED ON MARKET VALUATION 20,9 BILL. CONSUMER HEALTHCARE PHARMACEUTICALS VACCINES EQUITY VALUE BASED ON FORECASTED CASH-FLOW 24,2 31.4 BILL. CONSUMER HEALTHCARE PHARMACEUTICALS VACCINES CONSUMER HEALTHCARE PHARMACEUTICALS VACCINES GSK COULD SELL THE SEGMENT WITH A DOWNSIDE DISACOUNT CONSUMER HEALTHCARE PHARMACEUTICALS VACCINES

  22. 01 ANALYSIS 02 ALTERNATIVES STRUCTURE 03 RECOMMENDATION 04 IMPLEMENTATION 05 IMPACT

  23. 3 SEPARATE ENTITIES The recommendation is based on 3 different entities: pharma, vaccines and consumer healthcare. MAIN CHALLENGE: COMPROMISE BETWEEN WALMSLEY AND ELLIOTT

  24. 3 SEPARATE ENTITIES The recommendation is based on 3 different entities: pharma, vaccines and consumer healthcare. MAIN CHALLENGE: COMPROMISE BETWEEN WALMSLEY AND ELLIOTT WHAT DID ELLIOTT ASK FROM GSK?

  25. 3 SEPARATE ENTITIES The recommendation is based on 3 different entities: pharma, vaccines and consumer healthcare. MAIN CHALLENGE: COMPROMISE BETWEEN WALMSLEY AND ELLIOTT WHAT DID ELLIOTT ASK FROM GSK? WALMSLEY S PREFERENCE 1 SAME LEADERSHIP: CEO WALMSLEY 2 CONSUMER HEALTHCARE: NOT SOLD

  26. 3 SEPARATE ENTITIES The recommendation is based on 3 different entities: pharma, vaccines and consumer healthcare. MAIN CHALLENGE: COMPROMISE BETWEEN WALMSLEY AND ELLIOTT WHAT DID ELLIOTT ASK FROM GSK? WALMSLEY S PREFERENCE ELLIOTT S PREFERENCE 1 3 SAME LEADERSHIP: CEO WALMSLEY NON-EXECUTIVE DIRECTORS IN BOARD 2 4 CONSUMER HEALTHCARE: NOT SOLD PHARMA & VACCINES: NO INTEGRATION 5 BIGGER R&D BUDGET FOR GSK

  27. 01 ANALYSIS 02 ALTERNATIVES STRUCTURE 03 RECOMMENDATION 04 IMPLEMENTATION 05 IMPACT

  28. HUMAN RESOURCES: RESTRUCTURING To grow, we must focus on the people within the Organization. GlaxoSmithKline

  29. HUMAN RESOURCES: RESTRUCTURING To grow, we must focus on the people within the Organization. PHARMACEUTICALS GlaxoSmithKline VACCINES CONSUMER HEALTH

  30. HUMAN RESOURCES: RESTRUCTURING To grow, we must focus on the people within the Organization. NON-EXECUTIVE BOARD MEMBERS 1. PHARMACEUTICALS GlaxoSmithKline FIND THE RIGHT EXPERTS 2. VACCINES 3. KEEP EMPLOYEES CONSUMER HEALTH

  31. HUMAN RESOURCES: RESTRUCTURING To grow, we must focus on the people within the Organization. 1. Industry experts 2. Scientists 3. Investors NON-EXECUTIVE BOARD MEMBERS 1. PHARMACEUTICALS GlaxoSmithKline FIND THE RIGHT EXPERTS 2. VACCINES 3. KEEP EMPLOYEES CONSUMER HEALTH

  32. HUMAN RESOURCES: RESTRUCTURING To grow, we must focus on the people within the Organization. 1. Industry experts 2. Scientists 3. Investors NON-EXECUTIVE BOARD MEMBERS 1. PHARMACEUTICALS GlaxoSmithKline 1. Partnering with universities 2. Organize events and competition 3. Target great minds FIND THE RIGHT EXPERTS 2. VACCINES 3. KEEP EMPLOYEES CONSUMER HEALTH

  33. HUMAN RESOURCES: RESTRUCTURING To grow, we must focus on the people within the Organization. 1. Industry experts 2. Scientists 3. Investors NON-EXECUTIVE BOARD MEMBERS 1. PHARMACEUTICALS GlaxoSmithKline 1. Partnering with universities 2. Organize events and competition 3. Target great minds FIND THE RIGHT EXPERTS 2. VACCINES 1. Compensation 2. Motivation 3. Organizational culture 3. KEEP EMPLOYEES CONSUMER HEALTH

  34. PR: JUDGEMENT OF GSK GSK should be the leader in collaboration and supporter of the healthcare ecosystem. IMPROVEMENT BASED ON THE VCI MODEL VISION CULTURE IMAGE

  35. PR: JUDGEMENT OF GSK GSK should be the leader in collaboration and supporter of the healthcare ecosystem. VISION: conveyedimage, the values showedoutwardby theCompany. IMPROVEMENT BASED ON THE VCI MODEL CULTURE: iceberg visible elements, values, routines, beliefes. VISION CULTURE IMAGE: reflectionof the company, externalperceptions.. IMAGE

  36. PR: JUDGEMENT OF GSK GSK should be the leader in collaboration and supporter of the healthcare ecosystem. VISION: conveyedimage, the values showedoutwardby theCompany. IMPROVEMENT BASED ON THE VCI MODEL CULTURE: iceberg visible elements, values, routines, beliefes. VISION CULTURE IMAGE: reflectionof the company, externalperceptions.. Becoming the center of collaboration and an active player in the healthcare ecosystem. IMAGE

  37. OPERATIONS: TIMETABLE Forthe upcoming2 yearsGSK haveto focus oninnerdevelopment, insteadof dowsizing. # ACTIVITY 2023/1 2023/2 2024/1 2024/2 1. Look for new board members 2. 3. Working with consulting partners Working experts on the field of HR 4. Restructuring 5. Partnering with universities 6. Building out collaboration 7. Employee branding 8. Cultural education 9. R&D development

  38. STRATEGY: CONTINGENCY PLAN GSK srestructuring has manyrisksand challenges. MITIGATION SOLUTION RISKS Building collaborations. Lack of synergies in the Company. 1 Impact 2 Attract the best experts. 2 Low return on R&D. 4 Organizational resistance. Motivating and compensating employees. 3 1 Working with consultants and experts. Difficulties of collaboration. 3 4 Probability

  39. FINANCE: EFFECTS In order to implement the strategy, the company have to invest 657 709 million Overall extra cost in FY23 The estimated cost of creating new entities is 150 200 million 1 1. Cost of organizational restructuring Increased personnel expenses due to the need for new employees: 250 300 million 2 2. Personnel expenses Increase of the R&D budget on a yearly basis: 150 200 million 3 3. R&D budget Other operating expenses like employee education will increase as well: 7 9 million 4. OOE 4

  40. 01 ANALYSIS 02 ALTERNATIVES STRUCTURE 03 RECOMMENDATION 04 IMPLEMENTATION 05 IMPACT

  41. FINANCIAL IMPACT GSK s equity value is 144 billion. Financial Forecast 60,000 48,247 50,000 44,673 Declining profit in the initial phase of the transformation 41,364 38,300 40,000 35,463 30,000 From FY 24 the operating profit will increase 20,000 10,321 9,682 9,091 8,544 8,188 10,000 Equity value: 144 billion pounds - 2023 2024 2025 2026 2027 Total revenue Operating profit

  42. EXECUTIVE SUMMARY Executive summary with the most important elements of the solution. ANALYSIS NEED TO RESTRUCTURE GSK 5 ALTERNATIVES: PRE-SPIN-OFF, POST-SPIN-OFF, ELLIOTT S WISH, 2X NEW ALTERNATIVES ALTERNATIVES RECOMMENDATION 3 SEPARATE ENTITIES 1. HUMAN RESOURCES: RESTRUCTURING 2. PR: JUDGEMENT OF GSK 3. OPERATIONS: TIMETABLE 4. STRATEGY: CONTINGENCY PLAN 5. FINANCE: EFFECTS IMPLEMENTATION IMPACT EQUITY VALUE OF 144 BILL.

  43. EXECUTIVE SUMMARY Executive summary with the most important elements of the solution. ANALYSIS NEED TO RESTRUCTURE GSK QUESTIONS 5 ALTERNATIVES: PRE-SPIN-OFF, POST-SPIN-OFF, ELLIOTT S WISH, 2X NEW ALTERNATIVES ALTERNATIVES SPINNING OFF CONSUMER HEALTHCARE IS A GOOD IDEA? YES. RECOMMENDATION HOW CAN GSK REGAIN ITS POSITION IN THE INDUSTRY? 3 DIFFERENT ENTITIES. HOW TO MAKE GSK BE INNOVATIVE AND EFFICIENT? DIFFERENT ENTITIES: DIFFERENT CHALLENGES. HOW TO CONVINCE ELLIOTT ABOUT THE PLAN? COMPROMISE (MAIN CHALLENGE). 3 SEPARATE ENTITIES 1. HUMAN RESOURCES: RESTRUCTURING 2. PR: JUDGEMENT OF GSK 3. OPERATIONS: TIMETABLE 4. STRATEGY: CONTINGENCY PLAN 5. FINANCE: EFFECTS IMPLEMENTATION IMPACT EQUITY VALUE OF 144 BILL.

  44. GlaxoSmithKline THE FUTURE OF EMMA WALMSLEY JOHN MOLSON MBA INTERNATIONAL CASE COMPETITION CASE 5 2023

  45. COMPANY`S VALUATION Pound billion Equity value Sales Price/Sales Operating profit Price/Operating profit PAT Price/PAT Eliott 104.4 34.1 3.1 7.8 13.4 6.4 16.3 Market 71.2 34.1 2.1 7.8 9.1 6.4 11.1

  46. CONSUMER HEALTHCARE`S VALUATION Pound billion Consumer healthcare revenue Price/Sales multiple Equity value consumer healthcare FY20 10 2.1 20.9

  47. CONSUMER HEALTHCARE`S VALUATION BASE CASE

  48. CONSUMER HEALTHCARE`S VALUATION PESSIMISTIC CASE

  49. FINANCIAL FORECAST Perimeter 8.0% (34.3)% 2023 35,463 (12,172) 23,291 (11,764) (5,285) 331 1,616 (15,103) 8,188 23.1% 2024 38,300 (13,146) 25,154 (12,867) (5,708) 357 1,608 (16,610) 8,544 22.3% 2025 41,364 (14,198) 27,166 (13,897) (6,165) 386 1,600 (18,076) 9,091 22.0% 2026 44,673 (15,333) 29,340 (15,009) (6,658) 417 1,592 (19,658) 9,682 21.7% 2027 48,247 (16,560) 31,687 (16,209) (7,191) 450 1,584 (21,366) 10,321 21.4% (33.6)% 8

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