In the pharmaceutical industry, 
GlaxoSmithKline (GSK) ranks as one of the largest companies by market capitalization. The company wields its might across multiple therapeutic classes, including cardiovascular, metabolic, respiratory, neurological, and antiviral, as well as vaccines and consumer products. Prescription drug and vaccine sales account for close to 80% of total sales.
We forecast average annual sales growth of 3% during the next 10 years, with new products offsetting patent losses. Further, growth in emerging markets should mitigate the patent losses in developed markets, as brand names are more important in emerging markets and give products a much longer life cycle. Also, steady growth from vaccines and consumer health-care products should reduce the volatility from patent losses in the prescription drug business. We expect steady operating margins over that period as cost-cutting efforts help to offset expansion into lower-margin geographies and lost sales from the high-margin drug Advair, and maintain our fair value estimate of £17.77.
Like all pharmaceutical companies, Glaxo faces risks of drug delays or nonapprovals from regulatory agencies, an increasingly aggressive generic industry, and competition in the pharmaceutical industry.
Glaxo is trying to follow up Advair with its next-generation respiratory drug BREO, but the new drug posted poor Phase III data, creating challenges for the firm in the respiratory area. However, outside of the potential generic competition to Advair, the company faces only minor near-term patent losses.
Glaxo's pipeline is emerging with several new potential blockbusters. Rather than launching several drugs with slight enhancements, Glaxo's next generation of drugs addresses unmet medical needs.
