Annual Report & Accounts and Form 20-F 1997
`
`Leading the fight against disease worldwide
`
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`

`

`Glaxo Wellcome is a research-based company whose people
`are committed to fighting disease by bringing innovative
`medicines and services to patients throughout the world and
`to the healthcare providers who serve them.
`
`Glaxo Wellcome plc is an English public
`limited company, whose shares are listed
`on Stock Exchanges in London, New York,
`Tokyo and Paris.
`This report is the Annual Report &
`Accounts of the company for the year
`ended 31st December 1997. It comprises
`in a single document the Annual Report
`of the company in accordance with United
`Kingdom requirements and the Annual
`Report on Form 20-F to the Securities
`and Exchange Commission in the United
`States of America.
`A summary report on the year, the Annual
`Review 1997, is produced as a separate
`document and is issued to shareholders
`unless they have elected to receive the full
`Annual Report & Accounts. The Annual
`Review includes the Chairman's statement,
`the Chief Executive's statement, a
`summary review of activities, summary
`accounts and summary remuneration report.
`In accordance with requirements under
`the company's listing on the Tokyo Stock
`Exchange, an Annual Securities Report
`(Form No. 8) will be filed with the
`Minister of Finance of Japan on or before
`31st May 1998.
`
`Front cover image: Dr Ma Xiu-Yun, chief
`physician at the Di-Tan Hospital in Beijing,
`who has been involved with the phase III
`clinical trials of lamivudine in China.
`The Queen’s Award for Technological
`Achievement 1996 was won by
`Glaxo Wellcome for the anti-migraine
`medicine Imigran (marketed as Imitrex
`in the USA).
`
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`

`

`01
`
`Contents
`
`Glaxo Wellcome plc
`Annual Report and Accounts
`Annual Report on Form 20-F
`for the year ended 31st December 1997
`
`Report of the Directors
`Financial summary
`
`Chairman’s statement
`
`Chief Executive’s statement
`
`Operating review
`
`Financial review
`
`The Board and committees
`
`Corporate governance
`
`Page
`
`03
`
`04
`
`06
`
`08
`
`22
`
`37
`
`38
`
`Annual accounts
`Directors’ statements of
`responsibility
`Reports by the auditors
`Consolidated profit and
`loss account
`Consolidated balance sheet
`Consolidated cash flow statement
`Statement of total recognised
`gains and losses
`Reconciliation of movements in
`equity shareholders’ funds
`Company balance sheet
`Notes on the accounts
`Principal financial statements
`in US format
`Financial record
`Principal subsidiary and
`associated undertakings
`Report of the
`Remuneration Committee
`
`Page
`
`40
`41
`42
`43
`44
`45
`45
`46
`47
`82
`84
`88
`90
`
`Shareholder information
`Share capital
`Glossary of terms
`Financial calendar and addresses
`Index
`
`Page
`
`98
`104
`105
`106
`
`In this report, “Glaxo Wellcome” or the “Group” means Glaxo Wellcome plc and its subsidiary
`undertakings and the “company” means Glaxo Wellcome plc.
`
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`02
`
`Cross reference to Form 20-F
`
`The information in this document that is referenced in the following table shall be deemed to be
`filed with the Securities and Exchange Commission for all purposes.
`
`Item
`
`page
`
`Item
`
`page
`
`102-103
`
`page
`
`n/a
`n/a
`
`n/a
`n/a
`
`Item
`14 Description of securities
`to be registered
`15 Defaults on senior securities
`16 Changes in securities and changes
`in security for registered securities
`17 Financial statements
`18 Financial statements
`Directors’ statements of responsibility
`Reports by the auditors
`Consolidated profit and loss account
`Consolidated balance sheet
`Consolidated cash flow statement
`Statement of total recognised
`gains and losses
`Reconciliation of movements
`in equity shareholders’ funds
`Company balance sheet
`Notes on the accounts
`19 Financial statements and exhibits
`(A)
`See Item 18
`(B)
`n/a
`
`40
`41
`42
`43
`44
`45
`45
`46
`47-81
`
`1 Description of business
`General
`World market
`Sales profile
`Products
`Marketing and distribution
`Competition
`Research and development
`Intellectual property
`Manufacture and supply
`Regulation
`Chlorofluorocarbons
`
`2 Description of property
`Research and development – General
`Manufacture and supply
`Notes on the accounts – Note 12
`Notes on the accounts – Note 27
`
`3 Legal proceedings
`Legal proceedings
`
`4 Control of registrant
`Control of company
`Directors and officers
`
`5 Nature of trading market
`Nature of trading market
`Analysis of shareholdings at
`31st December 1997
`
`8
`9
`9
`10-11
`12
`12
`13-16
`17
`18
`18
`18
`
`13
`18
`54
`67
`
`19
`
`100
`100
`
`99
`100
`
`6 Exchange controls and other limitations
`affecting security holders
`Exchange controls and other limitations
`affecting security holders
`
`98
`
`7 Taxation
`Taxation for US residents
`
`23-36
`
`30-31
`
`8 Selected financial data
`22
`Selected financial data
`Holders of American Depositary Shares 101
`Exchange rates
`103
`9 Management’s discussion and analysis
`of financial condition and results
`of operations
`Financial review
`9A Quantitative and qualitative
`disclosure about market risk
`Treasury policies
`10 Directors and officers of registrant
`37
`The Board and committees
`38-39
`Corporate governance
`Report of the Remuneration
`90
`Committee
`11 Compensation of Directors and officers
`Report of the Remuneration
`Committee
`90-97
`12 Options to purchase securities from
`registrant or subsidiaries
`Notes on the accounts – Note 23
`Report of the Remuneration
`Committee
`13 Interest of management in certain
`transactions
`Report of the Remuneration
`Committee
`
`60
`96
`
`97
`
`Forward-looking statements: Readers are referred to the paragraph on forward-looking statements on page 29 for cautionary language accompanying
`the forward-looking statements set out: in the Outlook section on page 29; in the Chairman’s statement on page 04; in the Chief Executive’s
`statement on page 06; in the Operating review on page 13; and in the Financial review on pages 23, 24, 28, 29, 30 and 31.
`The noon buying rate on 9th March 1998 was £1 = US$1.64.
`
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`03
`
`Financial summary
`
`Financial results
`
`Summary balance sheet
`
`Financial highlights of the year
`
`Sales
`Trading profit
`representing trading margin of
`Net interest payable
`Profit before taxation
`Tax rate
`Earnings/Net income
`Earnings per Ordinary Share
`
`Dividends per Ordinary Share
`
`Net operating assets
`Net debt
`Net assets
`Shareholders’ funds
`Minority interests
`Financing
`
`Increase/(Decrease)
`£%
`CER %
`(4)
`5
`(10)
`(1)
`
`–
`
`3
`2
`
`(9)
`
`(7)
`(8)
`
`3
`
`1997
`£m
`7,980
`2,822
`35.4%
`123
`2,686
`30.5%
`1,850
`52.0p
`
`35.0p
`
`1996
`£m
`8,341
`3,132
`37.5%
`187
`2,964
`31.5%
`1,997
`56.7p
`
`34.0p
`
`At 31.12.97
`£m
`3,289
`(1,399)
`1,890
`1,843
`47
`1,890
`
`At 31.12.96
`£m
`3,250
`(1,983)
`1,267
`1,225
`42
`1,267
`
`Delivered 1997 commitment
`-
`Sales growth of 5 per cent CER
`-
`Earnings growth of 3 per cent CER.
`Sales excluding Zantac (83 per cent of portfolio) up 13 per cent CER
`-
`Respiratory up 14 per cent to £1.8 billion
`-
`Anti-virals up 16 per cent to £1.4 billion
`-
`CNS up 40 per cent to £0.95 billion.
`Reported results adversely affected by strength of sterling.
`Trading margin impacted by additional selling expenditure.
`Net debt reduced by £584 million.
`
`■
`
`■
`
`■
`
`■
`
`■
`
`CER = Constant exchange rates.
`
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`

`04
`
`Chairman’s statement
`
`This has been a milestone year for Glaxo
`Wellcome. We have delivered our promise by
`producing a creditable trading performance,
`achieving significant progress with filing,
`approval and launches of new medicines, and
`successfully implementing our strategy of
`regionalisation.
`At the same time, we have taken major steps
`towards maintaining our leadership position
`at the cutting edge of medical science well
`into the next century. All this was achieved in
`a year in which we managed the expiry of the
`patent on Zantac, the biggest selling
`pharmaceutical of all time, in our largest
`market, the United States.
`The strength of the pound caused problems
`for many British-based companies during the
`year, and Glaxo Wellcome was no exception.
`While sales of £7,980 million fell in sterling
`terms, they rose by five per cent when measured
`at constant exchange rates (CER). Profit before
`tax of £2,686 million also fell in sterling terms
`but was unchanged in CER terms. Earnings
`per share fell to 52.0p, which represents two
`per cent growth in CER terms.
`The Board is recommending a final dividend of
`20p per share, 100 per cent of which will be paid
`as a Foreign Income Dividend. The total dividend
`for the year is 35p, up by three per cent.
`The year saw the expiry of US patents on two of
`our largest selling products, Zantac and Zovirax.
`Global sales of these two products declined by
`over 21 per cent with a resulting loss of sales
`of £583 million. However, sales of our new
`generation of products – those launched since
`1990 – grew by 47 per cent CER in the year,
`thus comfortably offsetting this decline. Despite
`these patent expiries being widely heralded as
`the most significant in the history of our
`industry, the company has been well prepared
`and we are taking them in our stride. Sales by
`our US company actually increased in the year,
`and excluding Zantac, went up by 18 per cent,
`a remarkable achievement.
`
`Sir Richard Sykes
`
`Clearly the impact of loss of Zantac sales in the
`USA will continue to be felt in 1998, but we
`remain confident in our expectation of a return
`to double digit sales growth in CER terms from
`1999, based on the quality, depth and diversity
`of our portfolio of marketed products and
`development pipeline and the resolve of our
`managers and staff in operations and functions
`throughout the world.
`In 1997, we achieved 27 major product
`approvals and completed 24 major regulatory
`submissions. A total of 18 new molecules
`entered development. In 1998 we anticipate
`filing over 2,500 submissions with regulatory
`authorities around the world, of which 32
`will be major ones. We remain on track to
`achieve our goal of bringing three significant
`medicines to the market a year from the year
`2000 onwards.
`During the second half of 1997 we launched
`Romozin for the treatment of type II diabetes
`in the UK but subsequently took the decision
`to withdraw it from the market in the light
`of reports of potential liver toxicity, which
`continue to be reviewed. Raxar, a new broad
`spectrum quinolone antibiotic for respiratory
`infections, saw its first launches in Europe
`and the USA and Combivir, the first product to
`combine two antiretroviral drugs in a single
`tablet formulation, was introduced in the USA.
`The ultimate aim of our company is to fulfil our
`corporate mission while providing superior
`returns to our shareholders. An important key
`to achieving this balance is the skill we apply
`to managing all of the resources at our disposal
`– in particular the £1.2 billion we devote each
`year to research and development.
`Rapid and profound advances in technology
`and scientific knowledge are creating
`opportunities that are greater than ever before.
`Our scientists are developing new skills which
`are driven by genetics and genomics, state-of-
`the-art technologies, new partnerships and the
`sophisticated use of information. Shareholders
`
`can be assured that Glaxo Wellcome is at the
`forefront of the application of these new
`approaches which have the potential to change
`fundamentally the provision and the practice
`of medicine.
`Advances in science and technology affect all
`stages of the drug discovery process. They
`enable us to identify more readily and rapidly
`the key targets central to the development of
`novel medicines.
`This can be done in several ways. For example,
`informatics enables us to search, process and
`analyse vast amounts of information.
`Association genetics allows the collection
`of patient and genetic information in powerful
`databases to establish associations between
`genes and disease. Various techniques for
`collecting this genetic information will, in time,
`include the use of “genechips” that can perform
`sophisticated analysis quickly and relatively
`cheaply.
`Combinatorial chemistry and high throughput
`robotic screening are already revolutionising
`the search for new lead compounds. We now
`have machines that can synthesise millions of
`compounds a year. The technology of
`combinatorial chemistry, pioneered and under
`continuous development by Affymax (part of
`Glaxo Wellcome since 1995) has now been
`applied throughout our research organisation.
`The scientific resources required to capitalise
`on such new opportunities are vast and
`sophisticated, and will be found across a wide
`range of organisations. Access to these
`technologies requires partnerships between
`academia, small biotechnology companies and
`large pharmaceutical companies on a scale
`unimagined only ten years ago, and Glaxo
`Wellcome is playing its full part in the process
`of co-ordinating and integrating these skills.
`Turning to our operations throughout the world,
`the long-term strategy of regionalisation which
`we introduced in 1996 is already having an
`impact. Though worldwide in scope, its initial
`
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`

`

`05 Chairman’s statement
`
`It is supported throughout the world by highly
`motivated, committed and energetic employees.
`Among them are valued professionals from
`many disciplines who provide the intellectual
`and creative spirit which I believe is a
`distinguishing feature of our organisation.
`Shareholders will be aware that on 30th
`January 1998 we announced that Glaxo
`Wellcome was in merger discussions with
`SmithKline Beecham plc. On 23rd February
`SmithKline Beecham terminated these
`discussions. The proposed merger represented
`a compelling opportunity for both companies
`and the Board is disappointed at the outcome.
`Nevertheless, the Board is confident that
`the strategies in place provide firm foundations
`for a successful future.
`I would like to thank everyone within the
`company who has worked so hard during the
`year. I am proud of our achievements, not only
`in dealing with our short-term challenges but
`in laying the foundations for our continuing
`success in delivering medicines of sustainable
`value to patients around the world.
`
`Sir Richard Sykes, Chairman
`
`effects have been most evident in our operating
`companies in the emerging markets, where it
`has released energy, entrepreneurialism and a
`desire to identify new ways of doing
`business.
`A good example is in Poland, where we recently
`completed the acquisition of an 80 per cent
`shareholding in the pharmaceutical company
`Polfa Poznan SA. When combined with our
`existing company it will become the largest
`single pharmaceutical enterprise in Poland,
`providing us with a strong strategic foundation
`on which to expand our activities throughout
`eastern and central Europe.
`Throughout the world, we have continued to
`lay emphasis on the need for our operating
`companies to act as good corporate citizens
`and to respect the environment. An internal
`Chairman’s Award Scheme, launched in 1997,
`invited examples of good corporate citizenship
`programmes, including those involving
`employee participation, to be submitted to an
`independent panel.
`Good progress is being achieved with three
`long-term projects through which Glaxo
`Wellcome wishes to make a serious contribution
`to pressing problems of world health.
`Our new antimalarial Malarone, which is highly
`effective in the prevention and treatment of
`the disease, is now receiving regulatory
`approvals in countries where malaria is
`endemic. As discussed in last year’s report, the
`company has set up a donation programme to
`make the product available for patients who
`need it but could not otherwise afford it. We
`expect the programme to be piloted at selected
`district hospitals in Kenya during 1998 once
`the drug is approved, and extended to other
`countries subsequently.
`Action TB, the £20 million research
`collaboration between Glaxo Wellcome and
`universities in Canada, South Africa, the United
`Kingdom and the United States, has entered the
`final year of its first, five-year phase. The World
`
`Health Organisation has estimated that
`30 million people could die from tuberculosis
`in the next ten years and drug resistance is
`being found in all countries of the world. Better
`treatments are urgently needed. Through our
`project, great progress has already been made
`in understanding new targets for tackling this
`very difficult disease; Action TB will now be
`able to focus on creating specific medicines and
`vaccines.
`And finally, the Edward Jenner Institute for
`Vaccine Research, the result of a partnership
`between Glaxo Wellcome and the UK
`government which we believe to be unique
`of its kind, is now actively engaged in basic
`research to provide a better understanding
`of the biomedical science underpinning the
`discovery of effective new vaccines for the
`treatment and prevention of human disease.
`In May the Institute will occupy its new
`laboratories at Compton in Berkshire, an
`investment of some £10 million.
`Peter Job, Chief Executive of Reuters Holdings
`plc, was appointed as a Non-Executive Director
`in October 1997, and we warmly welcome him
`to the Board.
`Also in October we announced the appointment
`of Robert Ingram as Chief Executive,
`enabling me to relinquish that role. Bob, who
`has enjoyed a highly successful career in the
`pharmaceutical industry spanning 30 years,
`has been Executive Director with responsibility
`for the Americas since 1995 and President
`and Chief Executive Officer of Glaxo Wellcome
`Inc. in the USA since March 1994. He has now
`taken over full responsibility for business
`operations around the world. As a result of this
`decision, Seán Lance, Chief Operating Officer,
`has left the company. We extend our best
`wishes to him in his future career.
`I have every confidence that Glaxo Wellcome
`now has in place a senior management team
`of the highest calibre which is capable
`of providing strong and focused leadership to
`take us successfully into the new millennium.
`
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`

`

`06
`
`Chief Executive’s statement
`
`Robert Ingram
`
`The third powerful statement lies in the
`individual success stories coming out of many
`of our operating companies around the world
`in 1997, success that certainly underscores my
`optimism for the future.
`The highlight of our business performance was
`delivering the commitment we made about
`1997. Respiratory products increased 14 per
`cent to £1.8 billion, with excellent growth from
`Flixotide; anti-virals grew 16 per cent to £1.4
`billion – led by the exceptional growth of Epivir.
`But the highest growth category was CNS
`which, thanks to strong performances from
`Imigran/Imitrex, Lamictal, which has now been
`launched in over 60 markets, and Wellbutrin,
`rose by 40 per cent to £949 million.
`In North America, our largest market, sales
`were £3.6 billion, up three per cent. These sales
`represent 45 per cent of Group sales, up one
`percentage point on last year. The 33 per cent
`sales decline for Zantac coupled with sales
`reductions for Zovirax and Ventolin was offset
`by strong growth from Flixotide, Serevent,
`Flixonase and Zyban in the respiratory area,
`Epivir, Retrovir and Valtrex in anti-virals and
`Imigran/Imitrex, Wellbutrin and Lamictal in CNS.
`In western Europe, where sales of £2.5 billion
`showed a four per cent increase, gains in
`Flixotide, Flixonase, Serevent, Epivir, Valtrex,
`Lamictal and Imigran offset the sales declines
`of Zantac and Zovirax.
`
`The strong operating performance underlying
`our 1997 results makes several powerful
`statements not only about achievements during
`the year but also about the way ahead for the
`company. Taken together they provide evidence
`of our ability and resolve to continue to deliver
`the sales and earnings performance we have
`promised.
`First, the breadth of our portfolio. In 1995,
`Zantac and Zovirax together accounted for
`39 per cent of Group sales. In 1997 the
`proportion was down to 24 per cent. Rather
`than being dominated by two major products,
`Glaxo Wellcome now has one of the most
`broadly based portfolios in the industry with
`13 products achieving sales of over £200 million
`last year. Three of our key growth products,
`Serevent, our respiratory product, the migraine
`treatment Imigran, and Epivir for HIV/AIDS,
`already have sales in excess of £400 million.
`Second, the impressive rate of growth of our
`newer products. This is allowing us to make up
`for the major but not unexpected loss of sales
`resulting from the expiry of the US patents on
`Zantac and Zovirax. In 1997, no fewer than
`18 of our products had CER growth in double
`digits. Products launched in new markets during
`1997 provided £59 million of CER growth in
`the year. The products which are emerging from
`our pipeline, based on our outstanding R&D,
`demonstrate that we are capable not only
`of bridging the gap left by Zantac but
`maintaining strong, sustainable growth for
`many years to come.
`
`Good performances were recorded in Spain
`where sales of £215 million represented a
`17 per cent growth; Italy, up seven per cent
`to £362 million; and France where sales
`increased by ten per cent to £410 million.
`An early indication of the effectiveness of our
`policy of regionalisation came from Latin
`America. Despite accounting for only five per
`cent of total Group sales, this region is growing
`at such a pace that it contributed 23 per cent
`of the total Group CER sales growth in 1997.
`Mexico, Brazil, Puerto Rico, Argentina and
`Venezuela led the expansion while Epivir,
`Ventolin and Flixonase led the product growth.
`Sales of £377 million in Africa and the Middle
`East and eastern Europe rose by 13 per cent
`fuelled by higher sales of Ventolin, Flixotide,
`Flixonase, Serevent, Retrovir, Epivir, Zinnat and
`Fortum.
`Asia Pacific at £624 million was up by six per
`cent with good contributions from the
`Philippines, Australia, Thailand and India and
`strong performances from Epivir, Valtrex,
`Flixotide, Ventolin, Serevent and Zinnat.
`Sales in Japan, the world’s second largest
`market, accounted for seven per cent of total
`Group sales and grew by five per cent to
`£538 million. Good sales performances from
`Flixonase, Becotide, Zantac, Retrovir and
`introductory sales of Epivir were offset by falls
`in Zovirax and Zinnat.
`Turning to the different therapeutic areas,
`respiratory at 23 per cent of Group sales is
`the largest part of our business. Sales growth
`was fuelled by Serevent and Flixotide.
`
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`

`

`07 Chief Executive’s statement
`
`A further important message from the figures
`is that Glaxo Wellcome is clearly demonstrating
`the value of our products. No provider can
`afford to deliver healthcare regardless of cost.
`Our aim is to provide medicines which keep
`patients in primary care – away from hospitals
`and costly interventions such as surgery.
`In the USA where managed care is a proven
`practice, we have recorded a range of successes
`with programmes demonstrating how our
`products can achieve improved quality of life,
`enhanced productivity, patient satisfaction and
`reduced costs to the economy.
`These are goals to which healthcare providers
`everywhere aspire. Our policy of regionalisation
`is aimed at ensuring that we provide products
`and services which meet these needs and do
`not attempt to impose blanket global solutions
`on healthcare needs which vary so much from
`market to market.
`
`The final statement is about people. I am
`privileged to be serving as Chief Executive for
`a company which can claim some of the finest
`people anywhere in the industry. The magnitude
`of their achievement in 1997 is difficult to
`exaggerate.
`The 1997 performance was only possible
`because of their hard work, dedication and
`commitment. I am looking forward to working
`closely with them in the equally challenging
`year ahead.
`
`Robert Ingram, Chief Executive
`
`Products to treat viral infections have become
`the second largest category. The sector recorded
`strong double digit growth, despite generic
`competition to Zovirax in the USA from April
`1997. Epivir dominated the sector and, together
`with Retrovir, demonstrates the importance of
`the two products as the gold standard for HIV
`treatment. Combivir, a combination of Epivir
`and Retrovir, was launched successfully in the
`USA in October and we expect approval shortly
`in Europe.
`Generic competition led to a decline in gastro-
`intestinal sales which at £1.4 billion, now
`represent 17 per cent of Group sales, down from
`23 per cent in 1996. US sales in this sector of
`£649 million now represent only eight per cent
`of total Group sales.
`Imigran is the second largest product in our
`portfolio and we estimate that eight per cent
`of migraine attacks throughout the world are
`treated with this remarkable product. In the
`USA, where 13 per cent of all attacks have been
`treated, Imigran/Imitrex sales are benefiting
`from the success of direct-to-consumer
`advertising and the launch of the nasal spray
`formulation. CNS now represents 12 per cent
`of Group sales.
`Bacterial infections totalled £862 million,
`up one per cent. Raxar recorded encouraging
`introductory sales in the USA and, although
`it is early days for the product, we have had
`positive feedback from our sales force.
`
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`

`

`08
`
`Operating review
`
`■
`
`■
`
`■
`
`The Operating review describes the activities
`and resources of the business and identifies
`the developments and achievements in 1997
`under the following headings:
`Description of business
`■ World market
`Sales profile
`Products
`■ Marketing and distribution
`Competition
`Research and development
`Intellectual property
`■ Manufacture and supply
`Regulation
`Health, safety and the environment
`Legal proceedings
`Human resources
`Information systems
`Charitable and community support
`Discussion of the Group’s financial performance
`and resources is given in the Financial review
`on pages 22 to 36.
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`Description of business
`General
`Glaxo Wellcome plc, an English public limited
`company, and its subsidiary and associated
`undertakings constitute a major global
`pharmaceutical group engaged in the creation
`and discovery, development, manufacture and
`marketing of prescription and non-prescription
`medicines.
`Glaxo Wellcome was formed with effect from
`16th March 1995, when Glaxo plc acquired
`Wellcome plc.
`Glaxo and Wellcome, both established as
`businesses more than 100 years ago, had by
`the 1990s developed into major international
`pharmaceutical companies, each with
`strengths in a number of therapeutic areas.
`Combining Glaxo and Wellcome brought
`together two complementary businesses,
`with a shared emphasis on a research-based
`approach to the development and marketing
`of innovative human prescription medicines
`which offer comparative advantage in
`therapeutic efficacy.
`Glaxo Wellcome is an international business.
`Its principal executive offices and a number
`of its basic research and development (R&D)
`and production facilities are located in the UK.
`It has operating companies in some
`57 countries.
`Its products are currently manufactured in
`some 33 countries and sold in approximately
`150 countries.
`The major markets for the Group’s products
`are the USA, Japan, Germany, France, Italy
`and the UK.
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`Mission
`Glaxo Wellcome is a research-based company
`whose people are committed to fighting
`disease by bringing innovative medicines and
`services to patients throughout the world and
`to the healthcare providers who serve them.
`Goals
`In pursuit of the mission, the Group has
`focused on five clear goals:
`provide superior returns to shareholders
`achieve consistent improvement in the
`performance of the business
`attain sustainable leadership in the Group’s
`selected areas of therapy while increasing
`overall market share globally
`build a learning organisation that fully
`realises the potential of all the Group’s
`resources – people, technology,
`information and capital
`be recognised as the world’s premier
`healthcare company.
`Strategies
`To meet those goals, Glaxo Wellcome has
`established the following corporate strategies:
`to sustain long-term investment in science
`and technology
`to enhance continuously the skills
`of employees and promote the sharing
`of best practice from both internal and
`external sources
`to form partnerships and alliances to
`maximise capabilities in all parts of
`the business
`to maintain cost efficiency and
`productivity improvement programmes
`to focus on the needs of patients to help
`them live healthier, more productive and
`longer lives.
`Values
`In implementing these strategies, the Group
`will be guided – as individuals as well as an
`organisation – by a declared set of values.
`Glaxo Wellcome is committed to conducting
`all aspects of its business with integrity
`and honesty, to aspiring to excellence, and
`to promoting mutual trust and respect
`throughout the Group.
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`WATSON LABORATORIES, INC. , IPR2017-01622, Ex. 1112, p. 10 of 112
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`

`

`Sales profile
`Glaxo Wellcome’s principal prescription
`medicine products are presently directed to
`nine major therapeutic areas. An analysis of
`sales by these therapeutic areas is set out below:
`Sales by therapeutic area
`1997
`1996
`£m
`£m
`1,828
`1,757
`1,422
`1,360
`1,380
`1,946
`949
`724
`862
`939
`460
`434
`236
`240
`228
`221
`96
`112
`519
`608
`7,980
`8,341
`The Group is organised for management
`purposes on the basis of geographic regions. An
`analysis of sales by region is set out below:
`Sales by geographic region
`1997
`£m
`3,589
`2,849
`624
`538
`380
`7,980
`
`1995
`£m
`1,603
`1,099
`2,255
`501
`963
`451
`205
`187
`117
`592
`7,973
`
`1995
`£m
`3,495
`2,936
`575
`701
`266
`7,973
`
`1996
`£m
`3,683
`3,087
`646
`598
`327
`8,341
`
`Growth %
`1996-97
`15
`6
`–
`5
`9
`9
`(1)
`11
`9
`24
`
`World market
`Global pharmaceutical sales in 1997 were up
`9 per cent to £166 billion (growth in 1996 was
`8 per cent).
`World market by geographic region
`Value
`£bn
`61
`North America
`50
`Europe
`11
`Germany
`11
`France
`6
`Italy
`5
`UK
`26
`Japan
`13
`Latin America
`11
`Asia Pacific
`5
`Africa, Middle East
`While, on a global level, the annual increase
`is greater this year than the previous year, on
`a regional level, market growth has not been
`uniform:
`the North American region has seen the
`greatest increase, from 9 per cent growth
`in 1996 to 15 per cent in 1997.
`Europe has experienced a decline in growth
`from 9 per cent to 6 per cent while growth
`in the Japanese market has contracted
`from 1 per cent to minus 1 per cent.
`the emerging regions of Latin America and
`Asia Pacific have experienced contrasting
`fortunes. Growth in Latin America has
`increased from 7 per cent to 11 per cent,
`while in Asia Pacific, growth has slowed
`from 13 per cent to 9 per cent.
`The USA now accounts for 35 per cent of
`the global market and, with a 15 per cent
`growth rate, has seen the largest increase
`in absolute terms. Most of the major European
`markets saw similar growth to 1996, except
`for Germany where modest growth slowed
`abruptly in the latter part of 1997.
`Japan remains the second largest single
`market in the world, accounting for 15 per cent
`of the total.
`While Glaxo Wellcome has a major presence
`in the more mature markets of North America,
`Europe and Japan, the company has recognised
`the opportunity presented by the fast-growing
`emerging markets, particularly in the
`Latin American and Asia Pacific regions.
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`09 Operating review
`
`World market by therapeutic area
`Growth %
`Value
`1996-97
`£bn
`8
`29
`Cardiovascular
`8
`25
`Gastro-intestinal
`10
`23
`Bacterial infections
`15
`22
`CNS disorders
`8
`13
`Respiratory
`All the major therapeutic areas have seen sales
`grow at roughly the same rates as last year
`with the exception of anti-infectives and CNS
`treatments. The increase in the market for anti-
`infective treatments was partly because of a
`substantial increase in the sales of anti-viral
`treatments (mainly those for HIV). Strong
`growth across most sectors, and particularly
`among anti-depressants, helped fuel the
`acceleration in CNS sales.
`Glaxo Wellcome is the leader in the gastro-
`intestinal, anti-infective and respiratory
`markets with shares of 9 per cent, 10 per cent
`and 14 per cent respectively. It is seventh in
`the CNS market.
`Overall, Glaxo Wellcome leads the global
`prescription market with a share of 4.9 per
`cent, followed by Merck & Co and Novartis.
`Glaxo Wellcome has eight products in the
`world top 50 (representing a cumulative share
`of 3.3 per cent). These are Zantac (ranitidine
`hydrochloride), Imigran (sumatriptan), Zovirax
`(aciclovir), Zofran (ondansetron), Zinnat
`(cefuroxime axetil), Ventolin
`(salbutamol/albuterol), Serevent (salmeterol
`xinafoate) and Becotide (beclomethasone
`dipropionate). Epivir (lamivudine), Flixotide
`(fluticasone propionate), Retrovir (zidovudine)
`and Fortum (ceftazidime) are in the following
`40 products.
`
`Throughout this report, figures quoted for
`market size, market share and growth rates
`relate to the year ended 30th September 1997.
`These are Glaxo