GlaxoSmithKline, otherwise known as GSK, had officially closed their business in Bangladesh by the end of 2018. Thus is the end of such an international company matching shoulders with ICI, Pfizer, Nuvista, SK+F. The same year, the Anglo-Dutch company; Unilever Overseas BV announced that it would buy a 72% stake in GSK’s remaining Health Food and Drinks (HFD) business.
History:
The story of the world famous pharmaceutical company GlaxoSmithKline is more than 300 years old. With a history of three centuries over three continents, GSK is still a glimmering name in the pharmaceutical industry. Although GSK formed through mergers and acquisitions with different companies at different times in the last century, the company never deviated from its original principles.
It was to provide quality medicine based on their own research. GSK has more than 160 factories in more than 41 countries around the world. GSK drugs are sold in more than 140 medicine markets worldwide. According to their website, GSK provides more than 30 doses of vaccine per second, 1100 prescriptions of GSK medicines are written every minute, and every hour GSK spends more than $450,000 to create new products.
GSK Bangladesh:
GSK started its journey in Bangladesh in 1949. After carrying on business through import for more than 10 years, The company established its own pharmaceutical manufacturing factory at Fauzdarhat in Chittagong in 1983. The company was listed on the Bangladesh Stock Exchange in 1986. Following the acquisition trend of the major group companies, Glaxo to Glaxo Wellcome Bangladesh was established in 1995 and GlaxoSmithKline Bangladesh was established in Bangladesh in 2000.
Business Segment:
GSK originally had two business lines – Pharma and Consumer Healthcare. From the beginning, GSK has done business in many segments or therapeutic areas in the Pharmaceutical industry. GSK’s goal was to gain customer’s trust by selling research-based drugs in many segments while maintaining premium quality. GSK used to sell 57 brands of medicine in 13 therapeutic areas including vaccines. GSK’s portfolio in Consumer Healthcare includes brands like Horlicks, Horlicks Growth Plus, Sensodyne, Boost, Maltova, Glaxose D.
Despite struggling in the pharmaceutical industry, the company was operating business profitably in the consumer healthcare segment. Before the closure of the pharma business in 2018, GSK earned Taka 214 crore from this segment at the end of 2017, which was Taka 221 crore in 2015. On the other hand, the income from consumer healthcare business in 2017 was Taka 465 crore which was Taka 449 crore in 2015. In 2017, the total profit of GSK was 67 crore, which was 83 crore in 2016. Although the profits in consumer healthcare increased every year, the entire business was suffering due to the losses of their pharma businesses.
Reasons Behind the Shut Down:
In the post-independence period, there were a lot of foreign pharma companies in Bangladesh and they did business fruitfully. A law enacted in 1982 to boost the domestic pharma industry imposed a number of restrictions on foreign companies importing raw materials and manufactured medicines. Since then, foreign pharma companies have been doing business within these restrictions. However, the main reason for the closure of GSK’s pharma business was its inability to adapt to the ecosystem of the domestic pharma industry. However, the main reason for the closure of GSK’s pharma business was its inability to adapt to the ecosystem of the domestic pharma industry.
A not so special feature of the pharmaceutical sector in Bangladesh is that there is no research-based or R&D based medicine. In other words, the pharma market in Bangladesh is a branded generic market. The essence of the generic medicine market is that most of the medicines here are generic i.e. a copy of a previously branded medicine; its ingredients, methods, methods of use, effects, side effects, etc. are perfectly similar to the previously branded medicine. The generic drug is allowed to be marketed only after the patent of the branded drug (from which it is copied) expires. Foreign pharma companies tend to make R&D based drugs; GSK was no exception. The cost of making R&D based drugs is naturally higher than the cost of making generic drugs. GSKO has not stopped production of R&D based drugs in line with its parent company’s policy. As a result, there was no growth in revenue and the pharma segment was in loss. Due to restrictions, GSK was losing business in import-dependent medicines, including two of its major brands, Evohaler and Energix-B. Despite their relatively good position in the vaccine segment, GSK was similarly losing business in import-dependent vaccines.
Demand for GSK’s R&D-dependent drugs has been declining day by day due to the abundance and availability of generic drugs. Although some innovative medicines were introduced in the respiratory and oncology segments, their demand was not so high. Moreover, GSK was losing some business to less expensive drugs imported from China and India. Not to mention the fact that they couldn’t compete with domestic companies. GSK was losing both market share and market rich due to aggressive marketing and distribution of domestic companies. GSK’s share in the Bangladesh Pharmaceuticals market was less than 2%. Due to the inability to increase market reach and supply of medicines as per the demand, there was a huge gap in GSK’s product portfolio with the demand of the customers. Failure to maintain even a low market share, failure to achieve significant market reach, inability to compete with domestic companies and restrictions on imports of raw materials and manufactured medicines- due to all this, the company has been making losses in the pharma business since 2013. Finally, in 2018, the company was forced to close its pharma business by closing its 56-year-old factory in Fauzdarhat. From GSK’s 13 Therapeutic Areas, only vaccines continue to be supplied because UNICEF buys vaccines from several other companies, including GSK and Sanofi.
This is not the first time that a foreign company has left the Bangladesh pharmaceutical sector. In 1982, the UK-based pharma company ICI plc established its subsidiary company in Bangladesh called ICI Bangladesh. In 1992, ICI (plc.) divides their shares to local shareholders; at the same time the name of the company was changed to ACI Ltd. Pfizer (Bangladesh), a world famous pharma company, started its journey in Bangladesh in 1973. The company has the same consequences as ICI; Renata Ltd. was the new name. Nuvista, a 2006 subsidiary of the Netherlands-based Organon International (Formerly known as Organon Bangladesh), similarly left Bangladesh by diverting shares. Another foreign company, Sanofi, also announced its departure from Bangladesh last year.
GSK’s profitability has improved as loss-making and high-cost pharma businesses have closed. In 2019, the company’s gross profit margin was 55%, up from 35% -45% in previous years. The company made a loss of Tk 64 crore in 2016 due to various transition costs, including the closure of the pharma business, but in 2019 the company made a profit of around Tk 99 crore.
Unilever’s Acquisition:
Global FMCG giant Unilever, GSK intends to buy Bangladesh’s consumer healthcare segment in 2018, and in December of that year, the two companies came to an agreement on acquisitions. Since GSK’s pharma business has already closed, Unilever is in fact the majority shareholder of GSK’s entire business in Bangladesh. Through this acquisition, Unilever is indirectly included in the country’s stock market. On June 26 this year, GSK bought 72% or about 98.75 lakh shares of Bangladesh from Univer, the previous shareholder Setfirst. Unilever’s total cost to buy the shares in the block market of Dhaka Stock Exchange is Taka 2020.75 crore (Tk. 2046.30 per share).
Univer is buying the health food and drinks business of all the subsidiaries of GSK, not only in Bangladesh but also in India and 20 other countries in Asia, which will cost Unilever more than $3.7 billion. In April this year, Hindustan Unilever Ltd. of India (HUL), merged with GSK Consumer Healthcare India (GSK CH India). After this acquisition of Unilever and GSK Bangladesh, GSK has been renamed as Unilever Consumer Care. While there will be no changes to GSK’s core product portfolio, there will be some structural changes to the company. With the name change, GSK’s previous directors are no more; the new board of directors nominated by Unilever Group will sit on the board. Horlicks, Boost, and Glaxose D will be under Unilever Consumer. Sensodyne and Eno will go under Burroughs Wellcome & Company (Bangladesh), a subsidiary of GSK Group. As a result of this acquisition, Unilever will be able to take a strong position in the Health Food and Drinks (HFD) market worth Rs 410 crore.
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