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Glaxo (GSK) Earnings and Revenues Surpass Estimates in Q4


GlaxoSmithKline plc GSK reported core earnings of 72 cents per American depositary share in the fourth quarter of 2017, surpassing the Zacks Consensus Estimate of 69 cents. The bottom line was up 11% at constant exchange rate (CER) compared with the year-ago figure.

Glaxo’s shares have lost 9.4% in a year’s time against the industry’s 14.1% increase.

Quarterly revenues rose 4% at CER to $10.3 billion (£7.6 billion), driven by strong segmental performances in Consumer Healthcare, Pharmaceuticals and Vaccines. The top line also outpaced the Zacks Consensus Estimate of $9.9 billion.

All growth rates mentioned below are on a year-over-year basis and at CER.

Quarterly Highlights

Sales were up 4% in the United States and 7% in the International markets. On the flip side, sales in Europe were flat year over year.

Sales of New Pharmaceutical and Vaccine products surged 51%, driven by HIV drugs, Tivicay and Triumeq; respiratory drugs, the Ellipta products and Nucala; and the meningitis preventive vaccines, Bexsero and Menveo.

Glaxo reports financial figures under three segments: Pharmaceuticals, Vaccines and Consumer Healthcare.

The Pharmaceuticals division registered 3% revenue growth, driven by HIV drugs, Tivicay and Triumeq and respiratory disease drugs, Relvar/Breo and Nucala. This upside was but partly offset by the impact of recent divestments and a sales decrease of older respiratory products including Seretide/Advair and Established Pharmaceuticals.

HIV sales increased 17% on the back of 19% and 28% growth in the United States and International sales, respectively. Europe sales were also up 7% year over year. The encouraging numbers were driven by continued market share growth for both Triumeq (sales up 27%) and Tivicay (sales up 41%). However, sales of another HIV drug Epzicom/Kivexa tumbled 61% due to an increased generic competition, particularly affecting the European market.

Notably, the company’s latest product from the HIV portfolio is Juluca (dolutegravir + rilpivirine), the first two-drug regimen, once-daily, single pill for HIV. It was approved in the United States in November 2017. The drug generated initial sales of £5 million during the quarter. However, this week, Gilead Sciences GILD has announced an FDA approval of its triple combination, once-daily single tablet regimen, Biktarvy (bictegravir /emtricitabine /tenofovir alafenamide), for HIV-1 infection treatment. This approval might pose competitive threats to Juluca in the coming quarters.

Respiratory sales were up 2% at CER. In the EU and the International markets, sales increased 4% and 6%, respectively. However, in the United States, the metric was flat year over year. The sales improvement was mainly driven by the new respiratory products sales growth, partially offset by the sales decline of older products like Seretide/Advair, Flovent and Ventolin.

Notably, the recently launched respiratory product, Trelegy Ellipta (only once-daily single inhaler triple therapy for COPD), has generated initial sales of $2 million in the United States and the EU during the reported quarter.

The Ellipta products recorded a 53% surge in sales, driven by market share gains with the global roll-out continuing. However, this upside was offset by lower sales of Seretide/Advair (down 14%). Flixotide/Flovent and Ventolin sales decreased 12% and 9%, respectively.

Immuno-inflammation drugs, including Benlysta, rose 15% in the quarter.

The new grouping of Established Pharmaceuticals comprises the previous Established Products, Cardiovascular, metabolic and urology (CVMU) and other Pharma products. Established Pharmaceuticals sales declined 5% in the quarter under review.

Sales in the Consumer Healthcare segment climbed 4%, despite a slowdown in market conditions. The power brands, particularly in Pain relief and Oral health categories, saw a sturdy performance in the quarter.

Sales from the Vaccines segment were impressive, having increased 9% year over year. Geographically, the United States, Europe and the international markets increased 16%, 2% and 9%, respectively. While meningitis vaccines — Bexsero — decreased 5% in the United States, the same increased 15% in the Europe market. While Menveo in the United States posted higher sales, the same was offset by a weak performance of the Established Vaccines due to increasing competitive pressures on Infanrix and Pediarix in the United States and Europe.

It is important to note that in October 2017, the FDA granted an approval to Glaxo’s shingles vaccine, Shingrix. Later in the same month, the U.S. Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices voted in favor of three recommendations for the use of Shingrix. The vaccine is preferred over Merck’s MRK Zostavax. Owing to this favorable recommendation, Shingrix generated initial sales of £22 million in the United States during the period under discussion.

2017 Results

Full-year sales gained 3% year over year to $39.3 billion (£30.2 billion). However, the metric marginally missed the Zacks Consensus Estimate of $39.5 billion.

The 2017 earnings of $2.9 per share were in line with the Zacks Consensus Estimate. The full-year bottom line reflects 4% growth compared with the year-ago figure. Moreover, reported earnings matched the previously announced guidance for 2017.

2018 Outlook

The company stated that EPS growth for 2018 is uncertain due to the timing of the entry of Advair generics in the market. Hence, it issued two sets of guidance for 2018.

The company expects 4-7% EPS growth at CER in 2018, if no Advair generics are launched further this year. However, in the probable event of introducing Advair generics in the U.S. market by mid-2018, Glaxo anticipates adjusted EPS to be flat to down 3% year over year at CER.

Three companies Mylan MYL, Hikma Pharmaceuticals and Novartis which are trying to bring a generic version of Advair in the market received a complete response letter (CRL) from the FDA. While, Mylan and Hikma received CRL last year, Novartis received the same this week delaying the entry of generics in the U.S. market.

Long-term Guidance

The company projects its EPS to witness a CAGR in the mid-to-high-single-digit range through 2020.

While the Vaccine segment is estimated to register a mid-to-high-single-digit growth through 2020 despite competition for pediatric and flu vaccines, the Consumer Healthcare segment is expected to deliver low-to-mid-single-digit top-line CAGR through 2020.

GlaxoSmithKline PLC Price, Consensus and EPS Surprise

GlaxoSmithKline PLC Price, Consensus and EPS Surprise | GlaxoSmithKline PLC Quote

Zacks Rank

Glaxo carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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