FIN 460: INVESTMENT MANAGEMENT

PROJECT ON: ECONOMIC, INDUSTRY, FIRM, AND PRICE ANALYSIS.

Submitted To
Mr. Abdullah Al Aabed Lecturer, School of Business

Submitted By
NAFIZ AL RAZI (0820046) MIZANUR RAHMAN (0820092) ABU NASER CHOWDHURY (0710234) MOSTAFA REDWANUL AREFIN (0730192)

TABLE OF CONTENT Name Page No.

A. Introduction .... 02 B. Methodology... 02 C. Economic Analysis ..03 D. Industry Analysis .... 05

E. Company Analysis: Chapter 01 (Johnson & Johnson)..................................... 07 Chapter 02 (Pfizer)...14 Chapter 03 (Novartis)..20 Chapter 04 (GlaxoSmithKline)....27 F. Recommendation / Conclusion...... 33 G. References: Chapter 01.34 Chapter 02.34 Chapter 03.34 Chapter 04.34

H. APPENDIX:....35

Introduction
The most important job for a security analyst is to find whether or not it will be wise to invest on the security of selected industry, how are the stocks performing in this industry and which companies stock would have the best future possibility to have highest return with the risk associated with. The major objective of the term paper of FIN 460 is we have been asked to form a group of 4 people and select an industry to start the job of a security analyst. We have decided to do our analysis on Pharmaceutical Industry and for stock analysis we have chosen the New York Stock Exchange. The following report will be covered the U.S. economy analysis, the Pharmaceutical Industry analysis, four different companies of the same industrys stock analysis and the recommendation on investment. The reason behind choosing this industry and the stock market is because of the size of the industry and the availability of information. Beside this industry has a lifecycle which will never face decline stage. The demand for the products of this industry will always keep rising as this is a basic need for human beings which promises more secured investment. US profit growth was maintained even whilst other top industries saw little or no growth. Despite this, the pharmaceutical industry is the most profitable of all businesses in the U.S. In the annual Fortune 500 survey, the pharmaceutical industry topped the list of the most profitable industries, with a return of 17% on revenue. The leading companies in this industry in comparison with profit are Pfizer, Novartis, Merck & Co., Bayer, GlaxoSmithKline, Johnson and Johnson etc. Pharmaceutical companies commonly spend a large amount on advertising, marketing and lobbying. In the US, drug companies spend $19 billion a year on promotions. Advertising is common in healthcare journals as well as through more mainstream media routes. In some countries, notably the US, they are allowed to advertise directly to the general public. These opportunities will never let the sale of these industries go down.

Methodology
To understand the purpose of the report first we need to form a systematic method of the whole analysis. The approach will moved on with five stages. They are following:

1. Pharmaceutical Industry analysis: This part will be covered the analysis of worldwide Pharmaceutical business, Industry life cycle, economic structure of the market, the competitive strategies and government regulations on the business. 2. U.S. Economy analysis: To know how the stock will perform a better understanding will be the economy of which the stocks are based on. In this analysis, we will collect data to show how the U.S. economy is performing in terms of GDP growth, Inflation rate, and stock prices of U.S. 500 common stocks and will conclude with the U.S. position of the business cycle. 3. Stock analysis: Four firms in Pharmaceutical Industry have been chosen to analyze the stock performances. These firms are GlaxoSmithKline, Johnson & Johnson, Novartis and Pfizer. Each stock analysis will cover the stock price trends of previous two years, income statement and balance sheet analysis, P/E ratio, dividend growth rates, future plans and prospects of the firm and a recommendation part on the performance of the firm in future. The price analysis of the stock will be also included in this section to suggest weather the stock price is undervalued or overvalued with the help of technical analysis. 4. Recommendation: Based on the complete analysis, it will be suggested whether to invest or not in the Pharmaceutical Industry and if to invest, which stocks will provide higher returns.

The analysis will be done within these four steps and afterward we will complete the report with a conclusion paragraph.

ECONOMIC ANALYSIS
Money Supply The U.S. money supply comprises currencydollar bills and coins issued by the Federal Reserve System and the U.S. Treasuryand various kinds of deposits held by the public at commercial banks and other depository institutions such as thrifts and credit unions. The money supply is important because money is used in virtually all economic transactions; it has a powerful effect on economic activity. An increase in the supply of money works both through
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lowering interest rates, which spurs investments, and through putting more money in the hands of consumers, making them feel wealthier, and thus stimulating spending. Business firms respond to increased sales by ordering more raw materials and increasing production. The spread of business activity increases the demand for labor and raises the demand for capital goods. In a buoyant economy, stock market prices rise and firms issue equity and debt. If the money supply continues to expand, prices begin to rise, especially if output growth reaches capacity limits. As the public begins to expect inflation, lenders insist on higher interest rates to offset an expected decline in purchasing power over the life of their loans.

Gross Domestic Product (GDP) GDP at purchaser's prices is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources. Economic growth driven by consumer confidence means the economy is getting on strong footing. Now, more than ever, businesses need to understand consumer spending trends, and understand how the recession has changed shopping habits.
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INDUSTRY ANALYSIS
Pharmaceutical Industry: The pharmaceutical industry develops, produces, and markets drugs licensed for use

as medications. Pharmaceutical companies are allowed to deal in generic or brand medications and medical devices. They are subject to a variety of laws and regulations regarding the patenting, testing and ensuring safety and efficacy and marketing of drugs. In the United States, new pharmaceutical products must be approved by the Food and Drug

Administration (FDA) as being both safe and effective. There are 46 listed pharmaceutical companies in NYSE EURONEXT. In this pharmaceutical industry, there are five forces for industry analysis. Barrier to entry: High (Pharmaceuticals). Cost of R&D and patent limitations. Industry Competition: High, Advantages gained by the first mover advantage (patents). Supplier: Supplier power is low.

Figure: Porters Five Forces Model for Industry Analysis

Buyer: Buyer power is low. Substitute: Low (with patents), medium (after patent expiry).

Figure: Recent Stock Price Performance of Health Care Sector.

In general, the main competitors for the pharmaceutical industry are Pfizer, GlaxoSmithKline, Merck, Bristol-Myers Squibb, Abbott Laboratories, and Johnson & Johnson. However, with the recent spur in mergers and acquisition (M&A) activities in various industries, the pharmaceutical industry had a significant merger between two France competitors Sanofi-Synthelabo and Aventis creating Sanofi-Aventis, one of the top three pharmaceutical companies with Pfizer and GlaxoSmithKline.

Chapter 1
Companys Name: JOHNSON & JOHNSON
BY: MR. NAFIZ AL RAZI ID: 0820046

Companys Name: JOHNSON & JOHNSON (J&J). Back Ground: Johnson & Johnson has been a part of people's lives for 125 years and a valuable part of their investments for more than 65 years. Founded in 1886, they listed shares on the New York Stock Exchange for public investors in 1944. The Company and its subsidiaries are engaged in the research and development, manufacture and sale of a range of products in the health care field. It has more than 250 operating companies conducting business worldwide. The Company's operating companies are organized into three business segments: Consumer, Pharmaceutical and Medical Devices and Diagnostics. Company Profile: Johnson & Johnson is a holding company. During their history, they have built the most comprehensive base of health care businesses in the world, generating approximately 70 percent of their revenues from No. 1 or No. 2 global leadership positions in their respective markets. Their consistent performance has enabled them to deliver an exceptional track record of growth that few, if any, companies can claim: 27 consecutive years of adjusted earnings increases; and 49 consecutive years of dividend increases. Over the last 10 years, Johnson & Johnson stock generated a 4.0 percent total return for investors compared to a 1.4 percent total return for the S&P 500. Their net income in 2010 was $13,334,000,000. Stock Exchange Membership: NYSE. No. of Outstanding Shares: 2,735,213,719. Name of the CEO: William C Weldon. Top Competitors: Abbott Laboratories, Novartis AG, and Covidien plc. Recent Market Position:

Analysis of Financial Statements:

INCOME STATEMENT

Item
Sales to customers

Description
Aggregate revenue recognized during the period.

The Company
J&Js sale to customer declined from 2009 to 2010. J&Js operating earnings declined from increased from 2009 to 2010. J&Js earnings before

Operating earnings

The net result for the period of deducting operating expenses from operating revenue.

Earnings before provision for taxes on income

Sum of operating profit and non-operating income before income from equity method investments, income taxes, extraordinary items, cumulative effects of changes accounting principles, and non-controlling interest.

provision for taxes on income increased from 2009 to 2010. J&Js earnings before

Net Earnings

The portion of profit or loss for the period, net of income taxes, which is attributable to the close relative.

provision for taxes on income increased from 2009 to 2010.

BALANCE SHEET STATEMENT

Item
Total Assets

Description
Sum of the carrying amounts as of the balance sheet date of all assets that are recognized. Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.

The Company
Johnson & Johnson's total assets increased from 2009 to 2010.

Total Liabilities

Sum of the carrying amounts as of the balance sheet date of all liabilities that are recognized. Liabilities are probable future sacrifices of economic benefits arising from present obligations of an entity to transfer assets or provide services to other entities in the future.

Johnson & Johnson's total liabilities

increased from 2009 to 2010.

Shareholders Equity

Total of all Stockholders' Equity items, net of receivables from officers, directors owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the close relative.

Johnson & Johnson's shareholders equity

increased from 2009 to 2010.

FINANCIAL STRENGTH RATIO

Item
Current ratio liabilities.

Description
A liquidity ratio calculated as current assets divided by current

The Company
Johnson & Johnson's current ratio improved from 2009 to 2010.

Quick ratio

A liquidity ratio calculated as (cash plus short-term marketable investments plus receivables) divided by current liabilities.

Johnson & Johnson's quick ratio improved from 2009 to 2010.

Cash ratio

A liquidity ratio calculated as (cash plus short-term marketable investments) divided by current liabilities.

Johnson & Johnson's cash ratio improved from 2009 to 2010.

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MANAGEMENT EFFECTIVENESS RATIO

Item
Gross profit margin

Description
Gross profit margin indicates the percentage of revenue available to cover operating and other expenditures. profit

The Company
Johnson & Johnson's gross margin deteriorated

from 2009 to 2010. Operating profit margin A profitability ratio calculated as operating income divided by revenue. Johnson operating & profit Johnson's margin

improved from 2009 to 2010. Net profit margin An indicator of profitability, calculated as net income divided by revenue. Johnson & Johnson's net profit margin improved from 2009 to 2010. ROE A profitability ratio calculated as net income divided by shareholders' equity. Johnson & Johnson's ROE deteriorated from 2009 to 2010. ROA A profitability ratio calculated as net income divided by total assets. Johnson & Johnson's ROA slightly improved from 2009 to 2010.

Price Analysis:

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Item
P/E ratio

Description
The P/E ratio tells analyst how much an investor in common stock pays per dollar of current earnings.

The Company
Johnson & Johnson's P/E ratio slightly

declined from 2009 to 2010. P/OP ratio Because P/E ratio is calculated using net income, the ratio can be sensitive to nonrecurring earnings and capital structure, analysts can use price to operating profit. Johnson & Johnson's P/OP ratio slightly declined from 2009 to 2010. P/S ratio A rationale for the P/S ratio is that sales, as the top line in an income statement, are generally less subject to distortion or manipulation than other fundamentals such as EPS or book value. Sales are also more stable than earnings and never negative. P/BV ratio The P/BV ratio is interpreted as an indicator of market judgment about the relationship between a company's required rate of return and its actual rate of return. Johnson & Johnson's P/BV ratio declined from 2009 to 2010. Johnson & Johnson's P/S ratio slightly

declined from 2009 to 2010.

Johnson & Johnson (JNJ - Analyst Report) posted first-quarter 2011 earnings of $1.35 per share and 4.7% above the year-ago earnings of $1.29. Johnson & Johnsons revenues for the reported quarter increased 3.5% year-over-year to $16.2 billion. Revenues exceeded (beat) the Zacks Consensus Estimate of $15.8 billion. Including one-time items, the company reported earnings of $1.25, 22.8% below the year-ago earnings of $1.62.

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Future outlook and recommendations: I currently have a neutral recommendation on Johnson & Johnson. This is supported by the Zacks #3 Rank (short-term Hold rating). Even though Johnson & Johnson has been facing challenges in the form of OTC product recalls, pricing austerity in the EU and generic competition, I believe that the companys diversified business model, lack of cyclicality and strong financial position will help it in tough situations. Other catalysts could be regulatory approval for a couple of important pipeline candidates. Johnson & Johnson is currently seeking FDA approval for abiraterone acetate plus prednisone for the treatment of metastatic, advanced prostate cancer in patients who have received prior chemotherapy containing a taxane. So, I can easily recommend buying the stocks of Johnson & Johnson for short-term.

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Chapter 2
Companys Name: PFIZER INC.
BY: ABU NASER CHOWDHURY ID: 0710234

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Pfizer Inc. (PFE)

Company profile: Pfizer Incorporated is a global pharmaceutical company, ranking number one in sales in the world. The company is based in New York City. Pfizer's shares were made a component of the Dow Jones Industrial Average on April 8, 2004. Within recent years, Pfizer has faced some major happening for which their stock price has been moved downward and also some positive news to put an upward pressure on the stock value. Pfizer pleaded guilty in 2009 to the largest health care fraud in U.S. history and received the largest criminal penalty ever levied for illegal marketing of four of its drugs. Called a repeat offender, this was Pfizer's fourth such settlement with the U.S. Department of Justice in the previous ten years. On January 26, 2009, Pfizer agreed to buy pharmaceutical giant Wyeth for US$68 billion, a deal financed with cash, shares and loans. The deal was completed on October 15, 2009. Pfizer exists in a monopolistically competitive situation. They are involved in many markets because of their great variety of products, and the majority of those markets are monopolistically competitive. This means that there is a market where many firms produce similar goods, but each maintains some independent control of its own price. Although Pfizer faces a monopolistically competitive environment, they still hold a great deal of market power. Market power refers to the ability to alter the market price of a product. Recent relative information is following: Company nature Popular products biopharmaceutical company Lipitor, Lyrica, Viagra, Advil etc. Dow Jones Composite NYSE. 7,995,220,402 First

Index Membership:

Number of shares of common stock outstanding Market position on sale

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Income statement, balance sheet and cash flow analysis: Though their Total revenue shows a higher return but the net income faced a small decline but still this net income is the highest in the industry. Analysis of two years income statement of Pfizer inc. is given bellow: Description Dec 31, 2010 (Thousands) Total Revenue Operating Income or Loss Net Income Applicable To Common Shares 67,809,000 9,422,000 8,257,000 Dec 31, 2009 (Thousands) 50,009,000 10,827,000 8,635,000

Following are the two comparisons between important total figures of the two years balance sheet. Here, a notable change is in the total asset section. The amount of total asset has been decreased significantly from 2009 to 2010. Also they have successfully reduced the total liabilities of the firm. Description Dec 31, 2010 (Thousands) Total current asset Total Assets Total Current Liabilities Total Liabilities Total shareholder equity 60,468,000 195,014,000 28,609,000 107,201,000 87,813,000 Dec 31, 2009 (Thousands) 61,670,000 212,949,000 37,225,000 122,935,000 90,014,000

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These are the significant particles in cash flow of last two years. It is notable that financial activities faced major decline in cash flow from last year to this year. Description Dec 31, 2010 (Thousands) Total cash flow from operating activities Total Cash Flows From Investing Activities Total Cash Flows From Financing Activities 11,454,000 (492,000) (11,174,000) Dec 31, 2009 (Thousands) 16,587,000 (31,272,000) 14,481,000

Ratio analysis: Current ratio: A liquidity ratio calculated as current assets divided by current liabilities. Pfizer Inc.'s current ratio improved from 2008 to 2009 and from 2009 to 2010.

Description Current ratio

2010 2.11

2009 1.66

2008 1.59

2007 2.15

2006 2.20

Quick ratio: A liquidity ratio calculated as (cash plus short-term marketable investments plus receivables) divided by current liabilities. Pfizer Inc.'s quick ratio deteriorated from 2008 to 2009 but then improved from 2009 to 2010 exceeding 2008 level.

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Description Quick ratio

2010 1.51

2009 1.12

2008 1.24

2007 1.65

2006 1.76

Cash Ratio: A liquidity ratio calculated as (cash plus short-term marketable investments) divided by current liabilities. Pfizer Inc.'s cash ratio deteriorated from 2008 to 2009 but then improved from 2009 to 2010 exceeding 2008 level.

Description Cash ratio

2010 0.98

2009 0.70

2008 0.88

2007 1.17

2006 1.30

ROE: A profitability ratio calculated as net income divided by shareholders' equity. Pfizer Inc.'s ROE deteriorated from 2008 to 2009 and from 2009 to 2010.

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Description Return on equity

2010 9.40

2009 9.59

2008 14.08

2007 12.53

2006 27.10

Stock price analysis: Following chart shows last two years stock price analysis with regards to their trading volume. Notable change happened after May 2010, stock price have fallen significantly and the possible reason were the Fraud Issue happened on the year 2009. After that the stock price keeps moving upward with minor fluctuations.

Recommendation: From aforementioned analysis we can say that, though the stock have suffered minor fluctuation these days but by judging the Industry life and opportunities of the firm it can be conclude that the stocks of Pfizer are still undervalued. At this point, any rational investor should take the position on to hold or to buy the stocks. NASDAQ has recently recommended the stock is in a position of strong buy. The market expectation on the price is also to rise.

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Chapter 3
Companys Name: NOVARTIS AG.
BY: MIZANUR RAHMAN ID: 0820092

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Company Name: NOVARTIS AG. Back Ground: Novartis AG (Novartis), incorporated on February 29, 1996, provides healthcare solutions. Throughout the years, Novartis and its predecessor companies have discovered and developed many innovative products for patients and consumers worldwide. The Companys portfolio includes medicines, preventive vaccines and diagnostic tools, generic pharmaceuticals and consumer health products. The Company operates in four divisions: pharmaceuticals, vaccines and diagnostics, sandoz, and consumer health. On August 25, 2010, Novartis completed the acquisition of a further 52% interest in Alcon, Inc. (Alcon). On June 1, 2010, the Company completed the acquisition of Oriel Therapeutics Inc. On February 3, 2010, the Company completed the acquisition of Corthera Inc. On April 8, 2011, the Company completed the merger of Alcon, Inc. Industry: Health Care Switzerland

Jurisdiction of incorporation:

Number of shares of common stock outstanding: 2,289,445,178

Recent Market Price:

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1. Analysis of Financial Statement:

NOVARTIS Financial Overview Income Statement

Novartis
Dec 31 Dec 31 2009 2010 45103 51,561 32924 37,073 9982 11,526 9922 11,702 Change (2009 - 2010) 6,453 4,149 1,544 1780

Revenues Gross Profit Operating Income Income before taxes

ITEM

DESCRIPTION

THE COMPANY Novartis AG's revenues increased from 2009 to 2010.

Revenues

Aggregate revenue recognized during the period (derived from goods sold, services rendered, insurance premiums, or other activities that constitute an entity's earning process). For financial services companies, also includes investment and interest income, and sales and trading gains. The net result for the period of deducting operating expenses from operating revenues.

Operating income

Novartis AG's operating income increased from 2009 to 2010.

Novartis AG's net income increased from 2009 to 2010.

Net income

The consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.

Balance Sheet,
Novartis Dec 31 2009
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Dec 31 2010

Change (2009 - 2010)

Shareholders Equity Total Liabilities Total Assets

57,462 38,043 95,505

69,769 53,549 1,23,318

12,307 15,503 27,813

ITEM Total Assets

DESCRIPTION Sum of the carrying amounts as of the balance sheet date of all assets that are recognized. Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events. Total of Stockholders' Equity (deficit) items, net of receivables from officers, directors owners, and affiliates of the entity including portions attributable to both the parent and noncontrolling interests (previously referred to as minority interest), if any. The entity including portions attributable to the parent and noncontrolling interests is sometimes referred to as the economic entity. Sum of the carrying amounts as of the balance sheet date of all liabilities that are recognized. Liabilities are probable future sacrifices of economic benefits arising from present obligations of an entity to transfer assets or provide services to other entities in the future.

THE COMPANY Novartis AG's total assets increased from 2009 to 2010.

Shareholders equity

Novartis AG's total equity increased from 2009 to 2010.

Total liabilities

Novartis AG's total liabilities increased from 2009 to 2010.

KEY RATIOS
Novartis AG, liquidity Analysis
Dec 31 2009 Current ratio Quick ratio Cash ratio 1.73 1.4 0.89 Dec 31 2010 1.08 0.80 0.33

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RATIOS
Current ratio

DESCRIPTION
A liquidity ratio calculated as current assets divided by current liabilities.

THE COMPANY
Novartis AG's current ratio deteriorated significantly from 2009 to 2010. Novartis AG's quick ratio deteriorated significantly from 2009 to 2010. Novartis AG's cash ratio deteriorated significantly from 2009 to 2010.

Quick ratio

A liquidity ratio calculated as (cash plus short-term marketable investments plus receivables) divided by current liabilities.

Cash ratio

A liquidity ratio calculated as (cash plus short-term marketable investments) divided by current liabilities.

KEY RATIOS
Novartis AG, Profitability Analysis
Dec 31 2009 Return on Sales (%) Gross profit margin Operating profit margin Net profit margin Return on Investment Return on equity (ROE) Return on assets (ROA) 73.00 22.13 18.62 14.64 8.8 Dec 31 2010 71.9 22.35 18.99 15.5 7.94

ITEMS
Gross profit margin

DESCRIPTION
Gross profit margin indicates the percentage of revenue available to cover operating and other expenditures. A profitability ratio calculated as operating income divided by revenue.

THE COMPANY
Novartis AG's gross profit margin deteriorated from 2009 to 2010. Novartis AG's operating profit margin improved from 2009 to 2010. Novartis AG's net profit margin improved from 2009 to 2010.

Operating profit margin

Net profit margin

An indicator of profitability, calculated as net income divided by revenue.

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ROE

A profitability ratio calculated as net income divided by shareholders' equity. A profitability ratio calculated as net income divided by total assets.

Novartis AG's ROE improved from 2009 to 2010 not. Novartis AG's ROA deteriorated from 2009 to 2010.

ROA

2. Analysis of Price:

Price Analysis
Novartis AG, Valuation Ratios
Dec 31 2009 Price to earnings (P/E) Price to operating profit (P/OP) Price to sales (P/S) Price to book value (P/BV) 14.72 11.18 2.74 2.15 Dec 31 2010 13.16 12.39 2.75 2.05

RATIOS
P/E ratio

DESCRIPTION
The P/E ratio tells analyst how much an investor in common stock pays per dollar of current earnings. Because P/E ratio is calculated using net income, the ratio can be sensitive to nonrecurring earnings and capital structure, analysts can may use price to operating profit. The P/BV ratio is interpreted as an indicator of market judgment about the relationship between a company's required rate of return and its actual rate of return.

THE COMPANY
Novartis AG's P/E ratio slightly declined from 2009 to 2010.

P/OP ratio

Novartis AG's P/OP ratio slightly declined from 2009 to 2010.

P/BV ratio

Novartis AG's P/BV ratio slightly declined from 2009 to 2010.

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Last 1 Year Price Chart of Novartis:

3. Future Outlook and Recommendation: Currently, I have a Neutral recommendation on Novartis. The company carries a Hold rating in the short run. Though pleased with Novartis wide range of products and its efforts to diversify further, as is evident by the acquisition of eye-care company Alcon, I prefer to remain on the sidelines due to the imminent patent cliff faced by the company. I expect relaxing to be an important compound for Novartis going forward. Regulatory filings are planned for 2013 and the U.S. FDA's fast-track designation has already been granted. More importantly, this acquisition will also boost Novartis's biotech capabilities. It is also become an important revenue earner for Novartis in the future. This latest indication recommendation for Diovan can be seen as a last-ditch attempt to maximize revenues from the drug ahead of its patent expiry.

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Chapter 4
Companys Name: GlaxoSmithKline (GSK)
BY: MOSTAFA REDWANUL AREFIN ID: 0730192

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COMPANY ANALYSIS Companys Name: GlaxoSmithKline GSK is a global organization with offices in over 100 countries and major research centers in the UK, USA, Belgium and China. GlaxoSmithKline plc (GSK) is global healthcare group, which is engaged in the creation and discovery, development, manufacture and marketing of pharmaceutical products, including vaccines, over-the-counter (OTC) medicines and healthrelated consumer products. GSK shares are listed on the London and New York Stock Exchanges and their corporate head office is in Brent ford, UK. It was listed in NYSE in 17 Jan 1944. No. of Shares Outstanding: 2,598,132,010 Top Competitors: Novartis Ag (NVS), Pfizer Inc. (PFE), Sanofi-Aventis (SNY).

It can be said that GSK should try improving their quarterly revenue growth, which is not satisfactory even compared with the industry. They are maintaining a satisfactory P/E ratio and they should try to improve on their EPS. Overall, condition in compare with the competitor and industry can be concluded as satisfactory.
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Income Statement, Balance Sheet and Cash Flow Analysis INCOME STATEMENT Description Dec 31, 2010 (Millions) Total Revenue Operating Income Net Income Applicable To Common Shares 43, 700 5,823 2,515 Dec 31, 2009 (Millions) 45,866 13,622 8,943

Their Total revenue decreases slightly compared to the previous year, but there is a significant reduction in their operating income in comparison with 2009. BALANCE SHEET Description Dec 31, 2010 (Millions) Total current asset Total Assets Total Current Liabilities Total Liabilities Total shareholder equity Dec 31, 2009 (Millions) 28,373 69,216 19,569 53,059 16,157

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 CASH FLOW Description Dec 31, 2010 (Millions) Total cash flow from operating activities Total Cash Flows From Investing Activities Total Cash Flows From Financing Activities 9,461 -3,068 -7,382 Dec 31, 2009 (Millions) 11,589 -6,661 -3,224

These are the important data to analyze the cash flow of GSK for the years 2010 and 2009; here we can see a significant decrease in the overall cash flow. Cash flow from operations might decrease due to investment in some other areas. In the investment section we see a decrease in the amount which means the investment has been reduced and finally by looking at the financial activities it can be said the company has taken more money from its investors in 2010.

Current Ratio: GlaxoSmithKline PLC's current ratio deteriorated from 2009 to 2010. Quick Ratio: GlaxoSmithKline PLC's quick ratio deteriorated from 2009 to 2010. Cash Ratio: GlaxoSmithKline PLC's cash ratio deteriorated from 2009 to 2010.

PROFITABILITY Profit Margin Operating Margin

Dec 31, 2010 6.59% 32.04%

Dec 31, 2009

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Management Effectiveness Return on Asset (ROA) Return on Equity (ROE)

Dec 31, 2010 12.7% 19.16%

Dec 31, 2009

Stock Price Analysis

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From all the above chart and tables, it can be concluded that the price of the stock might go up in the future, as measure of relative price change and consistency is very high. From the 52 week high and low it is seen the price is very close to its highest range, also the previous day's closing price for GSK was close to its 50-day moving average. The analysts are suggesting a hold or buy, therefore investors should hold on their shares.

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Recommendation / Conclusion
The pharmaceutical industry has been remaining the most profitable of all businesses in the U.S for years. The stock price of any good firm has hardly seen downturn. It is believed that the industry is still in its growth stage because with the increasing number of population, the demand of the pharmaceutical product will keep increasing. The U.S economy is also recovering after a long recession started with the 2008 housing market crash. There GDP is growing gradually and government money supply shows that they are trying to stimulate the economy. Economic condition and industry analysis showing this is the best time to invest if anyone looking into investment in pharmaceutical industry. Among the stock have been analyzed, though Johnson & Johnson has been facing challenges in the form of OTC product recalls, pricing austerity in the EU and generic competition, it is believed that the companys diversified business model, lack of cyclicality and strong financial position will help it in tough situations. This is the reason for which this stock has been recommended to buy for short-term. Stocks of Pfizer inc. has always been a subject of controversy. For their previous legal settlements with the U.S government, many times their stock price has been suffered seriously. But after the last acquisition wyeth the stock price is rising. Beside they keep on providing high dividend to the investors. So the best recommendation for this stock is rite now to buy or to hold for long time dividend earning. After the recent acquisition of eye-care company Alcon, stock price are just rising and they have good prospect for future. It is recommended highly to buy for short term. The stock of GlaxoSmithKline has always been a subject of price consistency. The volatility of price change is very low. This stock would be the best for to hold on or to buy for long time. Based on this information, one can design the portfolio in the best way possible to maximize the profit and minimize the risk.

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REFERENCES OF CHAPTER - 01
http://www.nyse.com/ http://www.stock-analysis-on.net/
http://www.nyse.com/about/listed/lc_all_industry_5.html?ListedComp=All&supersector=19&se ctor=122&subsector=1120128534179&start=41&startlist=1&item=3&next=clicked&firsttime=do ne&default=2 http://www.sbtdc.org/pdf/industry_analysis.pdf

REFERENCES OF CHAPTER - 02
http://www.nyse.com/

REFERENCES OF CHAPTER - 03
http://www.nyse.com/ http://www.nyse.com/about/listed/nvs.html http://in.reuters.com/finance/stocks/companyProfile?symbol=NVS.N http://www.stock-analysis-on.net/NYSE/Company/Novartis-AG http://www.novartis.com/about-novartis/company-history/index.shtml

REFERENCES OF CHAPTER - 04
http://www.nyse.com/ http://investing.businessweek.com/businessweek/research/stocks/financials/financials.asp ?ticker=GSK:US&dataset=balanceSheet&period=A&currency=native http://www.tradingeconomics.com/united-states/inflation-cpi http://www.stock-analysis-on.net/NYSE/Company/GlaxoSmithKline-PLC
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APPENDIX
1. Porters Five Forces Model for Industry Analysis. (Pg- 04) 2. Recent Stock Price Performance of Health Care Sector. (Pg- 05) 3. Recent Market Position of JNJ. (Pg- 07) 4. Share Price Performance of JNJ on 3 Years. (Pg- 13) 5. Common Stock of Pfizer. (Pg- 22) 6. Last Year Price Chart of Novartis. (Pg- 26) 7. Stock Price Analysis of GlaxoSmithKline. (Pg- 31)

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