KARACHI, Aug 26: In the two months since June 30, the market value of GlaxoSmithKline Pakistan — the largest pharmaceutical company in Pakistan — has increased by Rs4.3 billion to Rs11.9 billion, from Rs7.6 billion. That’s due to the 56-per cent jump in the price of company stock from Rs124.75 to Rs195. The pharmaceutical giant’s share has outperformed the market index by a considerably wide margin.

Following the biggest ever merger of GlaxoWellcome with SmithKline Beecham in Pakistan, the number of outstanding shares in the company have increased to 61 million, with highly improved liquidity. During the January-July, 2003 period, nearly one million shares in the company were traded.

Volume of business for all of last year was less than 0.2 million shares. The price of company’s share during that period ranged between the low and high of Rs77 and Rs155. Analysts at major brokerage houses who cared little for the listed multinational pharmaceutical firms, due to their tight holding and lack of liquidity, have now started to give hard look at some of those so-called second and third tier stocks.

The previous Thursday, GlaxoSmithKline Pakistan released financial figures for the six months ended June 30, 2003, and declared bonus shares one-for-five (20 per cent). The company posted after tax profit of Rs618 million for the six months. This indicated growth of 140 per cent over taxed profit of Rs257.9 million for the comparable six months of 2002. Noticeably, the after tax earnings for the half year under review, were 14 per cent higher than the after tax profit of Rs543 million for all of 2002.

Major reason for the surge in profitability was the 14.7 per cent growth in net sales, which stood at Rs4 billion for the period under review, from Rs3.5 billion in the comparable six months of 2002. Cost of sales, on the other hand, remained almost flat at Rs2.42 billion, from Rs2.37 billion, the company understood to have benefited from strong rupee-dollar parity and improved economic outlook.

In the previous quarterly report, the company had claimed that many key products, including Augmentin, Amoxil, Engerix-B, Zinacef, Seroxat and Ventolin, had recorded double digit growth. Export and Animal Health sales also rose strongly. The consumer business also showed good growth over the same period last year with the reintroduction of Horlicks.

Gross profit for the half year ended June 30, 2003, increased by 41 per cent to Rs1.6 billion, from Rs1.1 billion with the gross margin stood higher at 39.5 per cent from 32 per cent. Other features of the accounts for the half term under review were the 118 per cent jump in operating profit to Rs894 million, from Rs411 million in the corresponding period of 2002, with operating margin doubled to 22.35 per cent, from 11.8 per cent. Financial charges decreased to Rs3.2 million, from Rs12.2 million, clearly the benefit of falling interest rates and improved cash flows.

Earning per share (eps) for the half year worked out at Rs10.18. At the current market price of Rs195, the share in the company is trading on price-to-earnings (p/e) multiple of 9.6 on annualized basis.

Mr M. Salman Burney, chairman/chief executive of GlaxoSmithKline, could be an envy of many corporate bosses in the country. Last year, he received what might possibly be one of the biggest pay packages for any corporate executive in the country — Rs16 million, including Rs2 million in retirement benefits. It is not to criticize the fat pay package of the man heading the largest pharmaceutical firm in Pakistan, for he possibly receives his due. Salman Burney had helped piece together the biggest ever merger in Pakistan. Effective January 1, 2002, amalgamation between Smith Kline & French of Pakistan Limited and Beecham Pakistan (Private) Limited took place, which latter merged with GlaxoWellcome to create GlaxoSmithKline (GSK). The huge leap in profitability during the half year to end-June 30, 2003, appears to be in part, the benefit of operational synergies effected by the mergers.

The company has announced date of closure of share transfer books from September 24 to September 30 (both days inclusive).