Pharmaceuticals

The pharmaceutical industry is highly competitive. GlaxoSmithKline’s principal competitors are large international pharmaceutical companies with substantial resources. Some of these companies and their major products are mentioned below.

Medicines may be subject to competition from different therapies during the period of patent protection and, once off patent, from generic versions. The manufacturers of generic products typically do not bear research and development costs and consequently are able to offer their products at considerably lower prices than the branded competitors. A research and development-based pharmaceutical company will normally seek to achieve a sufficiently high profit margin and sales volume during the period of patent protection to repay the original investment and to fund research for the future.

Competition from generic products generally occurs as GlaxoSmithKline’s patents in major markets expire. In response, GlaxoSmithKline undertakes a range of activities, including:

•  introducing innovative products into as many markets as possible
•  accelerating the process by which new products are brought to market
•  increasing brand share among customers.

Ultimately, GlaxoSmithKline believes that its competitive position is dependent upon the discovery and development of new products, together with effective marketing of existing products. Within the pharmaceutical industry, the introduction of new products and processes by competitors may affect pricing levels or result in product replacement, and there can be no assurance that GlaxoSmithKline’s products may not become outmoded, notwithstanding patent or trademark protection. In addition, increasing government and other pressure for physicians and patients to use generic pharmaceuticals rather than brand-name medicines may increase competition for products that have gone off patent.

CNS disorders
Major competitors to Paxil in the US selective serotonin reuptake inhibitor (SSRI) market are Prozac from Eli Lilly, Zoloft from Pfizer and Forest Laboratories’ Celexa. The success of Seroxat/Paxil has made it a target for generic manufacturers, against whom GlaxoSmithKline continues to respond appropriately (see note 31 to the Financial statements, ‘Legal proceedings’).

Imigran has grown to be one of GlaxoSmithKline’s leading products through addressing the previously unmet needs of migraine sufferers. Although other companies have launched competing products, newer formulations of Imigran, such as the nasal spray, and the introduction of Naramig have helped GlaxoSmithKline to retain its lead over its competitors in the migraine market.

Respiratory
Growth of GlaxoSmithKline’s newer respiratory products, Flixotide, Serevent and the recently launched Seretide, have continued to drive growth in this market. The established products such as Ventolin and Becotide have faced generic competition for some years but have maintained significant sales. A major competitor to GlaxoSmithKline’s respiratory products is Singulair from Merck.

Anti-bacterials
Major products competing with GlaxoSmithKline’s semi-synthetic penicillins are other anti-infectives including, but not limited to, generic brands, cephalosporins and, to an increasing degree, particularly in Japan, quinolones. Augmentin has been experiencing increased competition in the USA, particularly from Pfizer’s Zithromax, Bayer’s Cipro and Abbott’s Biaxin, and has lost patent protection in various countries in Europe. Amoxil has been without patent protection for a number of years and is subject to competition from generic brands.

Anti-virals
GlaxoSmithKline’s drive to create sustainable leadership in selected therapy areas is underlined by its pioneering role in the HIV market, with Retrovir and Epivir acting as the cornerstone of combination therapy, and available as Combivir in a single tablet. The launch of Ziagen and Agenerase and more recently Trizivir further broaden the Group’s portfolio of HIV products. Zovirax faces competition from generic acyclovir, although Valtrex has helped strengthen the company’s position in the anti-herpes area.

Metabolic and gastro-intestinal
Major competitors for Avandia are Takeda Chemical’s Actos, which is co-promoted with Eli Lilly in the USA. In the gastro-intestinal market, Zantac faces significant competition from omeprazole, a proton pump inhibitor, and from generic ranitidine hydrochloride.

Vaccines
GlaxoSmithKline’s major competitors in the vaccine market include Aventis Pasteur, Merck and American Home Products. Engerix-B and Havrix compete with vaccines produced by Merck – Comvax and Recombivax HB for hepatitis B and Vaqta for hepatitis A. Infanrix’s major competitors are Aventis Pasteur’s Tripedia and TriHIBit, and Wyeth Ayerst’s Acel-Imune and Tetramune.

Competition - Consumer Healthcare

The major competitors in the consumer healthcare markets are Procter & Gamble, Colgate-Palmolive, American Home Products, Unilever and Johnson & Johnson. All of these companies are major international companies and continue to be extremely active in what is a highly competitive market. In addition, there are many other large and small companies that compete with GlaxoSmithKline in selected markets.

In the USA, the major competitor products in OTC medicines are: Tylenol Cold (cold remedy), Clearasil (acne treatment), Pepcid (indigestion) and private label in smoking cessation. In the UK the major competitor products are: Lemsip (cold remedy), Nurofen and Anadin (analgesics) and Nicotinell (smoking cessation remedy).

In nutritional healthcare the major competitors to Horlicks are Ovaltine and Milo malted food and chocolate drinks. The competitors to Ribena are primarily local fruit juice companies while Lucozade competes with other energy drinks.

The Consumer Healthcare business relies on the development of high-quality branded products with good consumer acceptance, supported by advertising and brand promotion, line extensions, new formulations and packaging innovations. GlaxoSmithKline’s ability to compete effectively is dependent on its skills in developing new scientifically supported products and line extensions with performance superior to those of its competitors, backed up by compelling advertising.