How Did GlaxoSmithKline’s Global Pharmaceuticals Business Perform?



Global pharmaceuticals

The global pharmaceuticals segment is the largest revenue contributor for GlaxoSmithKline (GSK). The global pharmaceuticals include various products classified into therapeutic areas like respiratory, cardiovascular, metabolic and urology, immuno-inflammation, and established products.

The global pharmaceutical revenues declined by 9% at constant exchange rates to 2.9 billion pounds in 1Q16 as compared to 1Q15. The above chart shows revenues for some of the key products in global pharmaceuticals.

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Respiratory franchise

The respiratory franchise reported a revenue decline of 2% at constant exchange rates at 1.4 billion pounds during 1Q16. Seretide and Advair are the blockbuster drugs for the respiratory franchise. The revenues for both these drugs declined, as these drugs are losing their market share to the generic competition. Seretide and Advair sales fell by 19% at constant exchange rates to 753 million pounds in 1Q16. Excluding the impact of foreign exchange, the established respiratory products Flixotide and Flovent reported a 3% decline in sales while Ventolin sales increased 9% during 1Q16.

Ellipta, the new product range, has offset the revenue loss from Seretide and Advair by reporting combined sales of 169 million pounds during the quarter.

For the US markets, the 1Q16 revenues reported a 20% volume growth, which was substantially offset by the negative impact of price and mix of ~18%. Advair sales declined by 19% in US markets. However, new respiratory products including Ellipta and Nucala have substantially offset the decline due to Advair sales. For Europe markets, the sales declined by 13% to 348 million pounds, following a 24% decline in Seretide sales at 226 million pounds due to increased competition from generics and the transition to newer products. For international markets, the sales increased 1% to 437 million pounds.

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Cardiovascular, metabolic, and urology franchise

For the cardiovascular, metabolic, and urology (or CMU) franchise, the drugs Duodart and Jalyn have shown a strong performance while Avodart, one of GSK’s key products, has been exposed to generic competition since October 2015. The franchise sales declined by 13% at constant exchange rates to 184 million pounds during 1Q16. Avodart sales fell 26% at constant exchange rates due to generic competition in the US markets and supply disruption in Japan. GlaxoSmithKline divested its drug Prolia to Amgen (AMGN) in December 2015.

Investors can consider the VanEck Vectors Pharmaceutical ETF (PPH), which invests 5.2% of its holdings in GlaxoSmithKline, 5.2% in Johnson & Johnson (JNJ), 5.0% in Novartis (NVS), and 5.2% in Pfizer (PFE). Investors can also consider the PowerShares International Dividend Achievers ETF (PID), which holds 2.9% of its total assets in GlaxoSmithKline.


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