GSK Limited - Pharmaceutical Company

1) Shariah Stock screening Criteria in Pakistan

Securities of publicly traded firms that have been designated as shariah legal organizations for
investment may be found in shariah compliant stocks. The company's shariah compliance is
determined by its investment activities, major business, and financial status in the market.
Criteria that should be followed is stated below:

 Business of the Investee Company

 Interest bearing debt to total assets
 Non-compliant income to total revenue
 Non-compliant investment to total assets
 Illiquid assets to total assets
 Market price vs. Net liquid Assets.

2) Size of the sector

IMS estimates Pakistan's pharmaceutical industry to be worth Rs. 300 billion, with a 12-percent
annual growth rate. Pakistan's pharmaceutical sector includes more than 800 large-scale
pharmaceutical formulation units, including those administered by 25 multinational corporations.
Almost 90% of the raw material used in the production of medication is originated from abroad.

3) History/Introduction of GlaxoSmithKline (GSK)

Innovative Entrepreneurs: 1715-1891
The story began with a remarkable group of people in the 18th and 19th centuries who started a
number of businesses in the UK, Europe and the USA. In pharmacies, drugstores and
manufacturers, they developed innovative products, including medicinal soaps for cod liver oil.
The origins of Smith and Kline
In 1830 the Smith and Gilbert Drug House opened in Philadelphia, USA. had partnered with
Smith, Kline and Co. French, Richards and Co. acquired the company in 1891 to create the
Smith, Kline and French Company. "Smith Kline" is the origin of the "SK" in GSK.

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GSK Today: 2000- Present
The merger of SmithKline Beecham and GlaxoWellcome in 2000 resulted in GSK. Today we are
a science-based global healthcare company with around 100,000 employees worldwide. With our
three global pharmaceutical, vaccine and consumer healthcare businesses, we aim to offer
differentiated, high-quality and needed health products to as many people as possible.

4) The Current Size Analysis

The market share of GSK Pakistan at the end of the year 2020 was PKR 57 billion. The company
is a highly successful business with 7.4% of the value and 12% of the volume share of Pakistan's
Pharma market. The Pharmaceutical industry of Pakistan is of Rs.300 billion.

Market Share of GSK/ Total Market Share × 100.

57000000000/300000000000 = 0.19

0.19 ×100 = 19% Market Share

5) Shariah Stock Screening

 Qualitative Screening (Business Analysis)

Income on Savings & Deposit Account + Return on Treasury Bills/ Total Comprehensive
Income × 100

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235529/3251672× 100 = 7.24%

As, the answer is more than 5% then it lies under Non Shariah Compliant.

 Quantitative Screening (Financial Ratio Analysis)

Current Assets/ Current Liabilities

14,967,419/7,402,365 = 2.02%

5) Issues

During the quarter, GSK's drugs and vaccines segment, which accounts for 80% of the
company's total sales, had two big issues. Advair (also known as Seretide), the segment's top-
selling asthma medicine, saw sales fall across the board in most worldwide countries, and a
rising controversy in China ended up eating its developing market sales.

The problem of Advair

Last year, sales of Advair, one of the world's best-selling medications, totaled $8.1 billion.
Advair sales of $1.96 billion accounted for 18.6 percent of GSK's overall sales and 71 percent of
respiratory division revenue in the third quarter. GSK's respiratory portfolio contributes for 26%
of total revenues. GSK is attempting to milk every last penny out of Advair before it confronts
generic competition, as the medication's patent in the United States ended in 2010 and will expire
in Europe later this year. However, because to the intricacy of its unique Diskus inhaler, which is
patent protected until 2016, Advair has yet to face generic competition. However, Advair sales
are projected to collapse whenever firms successfully clone the Diskus or develop an alternate
breathing device. That worldwide 1% year-over-year reduction from the prior year suggests that
GSK may not be able to sell more Advair in 2013 than it did in 2012. The main reason is a
dramatic 12 percent drop in sales in the EMAP area as a result of GSK's continuing bribery
scandal in China, which brings us to GSK's second issue.

The problem of China

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Investigators in China allege GSK used local travel agents as an excuse to smuggle illegal bribes
into doctors and government officials in order to boost drug sales. The government is also
investigating Sanofi, Eli Lilly, Merck, Roche, Novartis (NYSE: NVS) and AstraZeneca on
similar allegations, but the charges against GSK are by far the most damaging. These issues
impacted GSK’s EMAP pharmaceutical and vaccine revenues in the third quarter. A 61% annual
decrease in total sales in China resulted in a 9% decrease in sales in EMAP's pharmaceuticals
and vaccines segments. Without China, EMAP sales would have increased 5%. GSK said it "will
continue to work with the authorities" but it is too early to "quantify the long-term impact of the
investigation on our performance in China." as stated in the company's third quarter results
release.

5) Remedies

6) Recommendations

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