GlaxoSmithKline plc GSK reported core earnings of 68 cents per American depositary share in the first quarter of 2018, missing the Zacks Consensus Estimate of 70 cents. However, earnings were up 11% at constant exchange rate (CER) compared with the year-ago figure.
Shares of Glaxo were down almost 4% on Apr 25 in after-hours trading due to lower-than-expected results in the reported quarter. Moreover, the stock has lost 2.4% in a year’s time against the industry’s 3.7% growth.
Quarterly revenues rose 4% at CER to $10.0 billion (£7.2 billion), driven by a strong performance at the Vaccines segment. The top line however, marginally missed the Zacks Consensus Estimate of $10.3 billion.
All growth rates mentioned below are on a year-over-year basis and at CER.
Quarterly Highlights
Sales were up 7% in the United States and 4% in the International markets. On the flip side, sales in Europe were flat year over year.
Glaxo reports financial figures under three segments: Pharmaceuticals, Vaccines and Consumer Healthcare.
The Pharmaceuticals division registered 2% revenue growth, driven by HIV drugs and respiratory disease drugs, namely Nucala and the Ellipta portfolio. This upside was partly offset by a decline in sales of older respiratory products including Seretide/Advair, Ventolin and Established Pharmaceuticals.
HIV sales increased 14% on the back of 15% and 12% growth in the United States and Europe, respectively. International sales were also up 11% year over year. These encouraging numbers were driven by continued market share growth for both Triumeq (sales up 20%) and Tivicay (sales up 24%). However, sales of another HIV drug Epzicom/Kivexa tumbled 52% due to a more severe 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. The drug was approved in the United States last November and generated first quarterly sales of £10 million compared with £5 million registered in the previous quarter.
However, last November, Gilead’s GILD triple combination, once-daily single tablet regimen, Biktarvy (bictegravir /emtricitabine /tenofovir alafenamide), was approved by the FDA for HIV-1 infection treatment. This nod from the regulatory agency might pose a competitive threat to Juluca in the future quarters.
Respiratory sales were flat at CER year over year. Though in the International markets, sales increased 6%, the metric declined 4% and 1% in the United States and Europe, respectively, during the quarter under review. The sales rise from the Ellipta portfolio and Nucala, were offset by a fall in sales of older products like Seretide/Advair and Ventolin.
Sales of new respiratory portfolio grew at 42%, including the first quarterly contribution from the newly launched Trelegy Ellipta.
Trelegy Ellipta (only once-daily single inhaler triple therapy for COPD) yielded sales of £10 million in the United States and £1 million in the EU during the first quarter.
Notably, in April, GSK announced that Trelegy Ellipta gained the FDA approval for an expanded indication. The new indication is for the long-term, once-daily, maintenance treatment of airflow obstruction in patients with COPD including chronic bronchitis and/or emphysema.
The Ellipta products recorded a 34% surge in sales, driven by market share gains with the global roll-out continuing. However, this upside was offset by weak sales of Seretide/Advair (down 20%). Ventolin sales dropped 9% year over year.
Immuno-inflammation drugs like Benlysta rose 21% in the quarter under discussion.
The new grouping of Established Pharmaceuticals comprises the previous Established Products, Cardiovascular, metabolic and urology plus other Pharma products. Established Pharmaceuticals sales decreased 5% in the quarter under review.
Sales in the Consumer Healthcare segment nudged up 2% 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 13% year over year, primarily driven by sales of the newly launched Shingrix vaccine (prevention of shingles) in the United States. Shingrix recorded sales of £110 million in the reported quarter, driven by a favorable recommendation from the U.S. Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices over Merck’s MRK Zostavax.
Moreover, the company stated that it is rapidly building a coverage for Shingrix vaccine. Presently, more than 90% patients has access to the vaccine via both Medicare and commercial channels.
It is important to note that Shingrix was approved in the EU as well as in Japan last month for the given indication.
In the United States, Vaccine sales soared 50% while in Europe and the international markets, the metric decreased 3% and 6%, respectively. Sales of the meningitis vaccine Bexsero increased 26% in the United States and 7% in the Europe market. While Menveo in the United States posted higher sales, the same was offset by a soft performance of the Established Vaccines, thanks to fierce competitive pressures on Infanrix and Pediarix in Europe.
2018 Outlook
The company continues to expect 4-7% EPS growth at CER in 2018, if no Advair generics are launched further this year.
However, in the probable event of Advair generics being introduced in the U.S. market by mid-2018, Glaxo anticipates its adjusted EPS to be flat to down 3% year over year at CER.
The three companies, namely Mylan MYL, Hikma Pharmaceuticals and Novartis, trying to bring a generic version of Advair to the market have received a complete response letter (CRL) from the FDA. While Mylan and Hikma got a CRL last year, Novartis was forwarded the same this year, delaying the entry of generics in the U.S. market.
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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