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GlaxoSmithKline’s 4Q15 Revenues Expected to Rise

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Jan. 13 2016, Updated 10:45 a.m. ET

GlaxoSmithKline’s revenue estimates

Analysts expect a growth of ~3% in GlaxoSmithKline’s (GSK) 4Q15 revenues at 6.36 billion pounds following strong product launches and improvements in the supply chain. The Novartis (NVS) deal should also add revenues to the Vaccines and Consumer Healthcare segments.

These factors could have a long-term effect, and analysts estimate year-over-year growth of ~5.4%, and 5.4% each for 1Q16 and 2Q16. On an annual basis, the estimates show a growth of ~4.7% for 2015, ~3.0% for 2016, and ~2.7% for 2017.

The above chart shows actual revenues and analysts’ estimates for GSK revenues since 4Q13. In this series, we will discuss various factors affecting these expectations for future revenues.

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Segment-wise expectations for 4Q15

GSK’s business is divided into three business segments:

  • Pharmaceuticals
  • Vaccines
  • Consumer Health

There has been a shift in the product performance and revenues of the Pharmaceuticals segment. For the present quarter, the new products, as well as HIV franchise revenues, are expected to surpass the decline in sales of its key products Seretide and Advair, turning the Pharmaceutical segment back to growth. The HIV products Triumeq and Tivicay have a strong demand in the US followed by European markets.

However, the disposal of the oncology business to Novartis (NVS) should have a negative impact on revenues as well as the profitability of this segment for coming quarters. We will discuss these products and therapeutic areas in more detail later in this series.

The inorganic growth by acquisition of Novartis’ portfolio of meningitis vaccines and other vaccines in March 2015 has increased exposure and revenues for GSK’s Vaccine segment. Although meningitis vaccines are adding to revenues, they have lower profit margins.

The Consumer Health revenues are expected to have a positive growth, following the successful launch of Flonase OTC, and relaunched products such as Excedrin and Theraflu, and oral health products under the Sensodyne brand. Skin health products are also expected to add to the revenue growth during 4Q15.

GlaxoSmithKline competes with Gilead Sciences Inc. (GILD), Bristol-Myers Squibb (BMY), AstraZeneca (AZN), and Sanofi (SNY) on various product mixes. Investors can consider funds like the PowerShares International Dividend Achievers ETF (PID) or the VanEck Vectors Pharmaceutical ETF (PPH) in order to diversify the risk in this industry.

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