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GlaxoSmithKline (GSK) Reports Q1 EPS of 167p; Will Retain Stake in ViiV Healthcare

May 6, 2015 7:42 AM EDT

GlaxoSmithKline (NYSE: GSK) reported Q1 EPS of GBP1.67, versus GBP0.14 reported last year. Revenue for the quarter came in at GBP5.62 million, versus GBP5.61 million reported last year.

Through application of the strategy set out in 2008 and the recently completed transaction with Novartis, GSK has created a new balanced group of world-leading businesses in Vaccines, Pharmaceuticals and Consumer Healthcare, which has broadened GSK’s scope to improve human health. In an update to investors today, GSK set out prospects for the newly shaped Group.

Sir Andrew Witty, Chief Executive Officer, GSK said:

“With the completion of the Novartis transaction, we have reviewed future prospects for the newly shaped Group, including the opportunities offered through the integration and our cash allocation strategy.

“We have done so recognising that our operating environment is shifting radically, particularly in relation to pricing and that we must be prepared for specific uncertainties, including the possible introduction of generic Advair in the US and the potential exercise of put options from partners in ViiV Healthcare and our Consumer Healthcare Business.

“Having done so, and with the substantial growth and synergy opportunities we have going forward, we are today setting out to shareholders our expectations for the Group over the medium-term and announcing a series of decisions which support delivery of this performance and future shareholder returns.

“For 2015, our financial performance will be impacted by the dilutive effect of the transaction and flow through of headwinds encountered in 2014. We then expect to see a sustained improvement in performance with revenues and earnings expected to grow in CAGR terms over the five year period 2016 to 2020 on a CER basis.

“We believe the Group’s new composition strengthens our ability to offer cost effective healthcare options to payors and governments and enables us to increase access for patients and consumers to our products.

“The importance of R&D to all three global businesses is demonstrated by the launch of Flonase OTC, the approval of Breo for asthma, the filing of a gene therapy to treat a rare disease and the publication of positive phase III data for Shingrix, all seen in the last few months.

“Driven by science-led innovation and a clear determination to realise the volume opportunities in the broad healthcare markets of the world, we believe GSK’s three businesses are well placed to deliver significant future value to patients, consumers and shareholders.”

Three World-leading Businesses

GSK’s product portfolio is now well diversified with 10 products generating annual revenues of more than £500 million per year. As a result of the transaction, total annual revenues are increased by £1.2 billion on a full-year 2014 historic pro-forma basis, and the Group is more balanced with revenues split across Pharmaceuticals 59%, Consumer Healthcare 25% and Vaccines 16% on the same basis.

The Group is positively exposed to broad areas of future healthcare demand and growth and present in more than 150 markets around the world. The transaction has significantly strengthened GSK’s positions in the US, Russia, Germany and a number of emerging markets, including China.

With three world leading businesses, GSK believes the Group is strongly positioned to meet the challenges of increasing demand for healthcare and sustained pressure to reduce prices of new medicines.

Specifically, the Group expects volume demand for its products to increase, particularly in Emerging Markets, and as governments and payors focus on cost effective interventions to support healthcare needs, such as Vaccines and OTC medicines. At the same time, the breadth of the Group’s overall portfolio provides substantial opportunities to develop flexible pricing responses to fluctuating economic pressures.

R&D innovation underpins all three of GSK’s global businesses. The Group has a pipeline of around 40 NMEs (drugs and vaccines) in phase II/III development and more than 80% of pre-clinical to phase-II NME projects can be classified as having novel mechanism of action. All three businesses are also supported by proprietary technologies and manufacturing capabilities in areas such as devices, adjuvants, bio-electronics and formulations. The Group will profile many of these opportunities at an R&D event for investors on 3 November 2015.

On ViiV Healthcare:

Within Pharmaceuticals, GSK remains confident of maintaining its global leadership in respiratory well into the next decade. The company continues to expect sales of Advair to decline, but with the ongoing transition to newer products, total respiratory sales are expected to return to growth in 2016. By 2020, the Group expects total respiratory sales to be at or above the level of sales in 2015, whether or not there is generic competition to Advair in the US in the period, with more than 90% of revenues generated from nine products (compared to four products currently).

HIV is the other key therapeutic franchise in the current pharmaceutical portfolio. Five years ago, GSK created ViiV Healthcare, a standalone global HIV business that has become a highly successful venture with equity partners Pfizer and Shionogi. The recent launches of Tivicay and Triumeq have continued to surpass expectations and there is clear scope to develop multiple dolutegravir-based regimens for treatment of HIV over the next few years. Progress has also been made to develop ViiV Healthcare’s pipeline with several promising assets in development including the long-acting integrase inhibitor, cabotegravir.

Having reviewed this very positive outlook, GSK has concluded that retaining its full, existing holding in ViiV Healthcare is in the best interests of the Group and GSK will not now be initiating an IPO of a minority stake.

For earnings history and earnings-related data on GlaxoSmithKline (GSK) click here.



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