Glaxo India is one of India's largest pharmaceutical companies. However, it forms only a miniscule 1.5% of the turnover of its parent Glaxo Wellcome. Why? Lets's throw some light on it.
If you examine the table below, you can make out the difference between the two.
Glaxo India is simply 'Too Small' in Glaxo Wellcome's priority list. Even a small nation like Japan contributes 7% to its revenues.
Putting things in the right perspective, Glaxo India's product portfolio is small compared to other markets in which Glaxo Wellcome operates. In the western markets and Japan its pricing power is higher because of the absence of regulations such as the Drug Price Control Order (DPCO). Also in these markets the product patent protection helps it pass on its research costs to the consumer, enabling it to earn better margins, than in India.
Post 2005, Glaxo India can look forward to a massive jump margins and revenues as a result of new product launches, when India is likely to adopt a product patent regime. Whether the growth comes from the listed entity or through a 100% subsidiary remains to be seen.
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