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GlaxoSmithKline’s Revenue Trend in 2Q16

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Aug. 1 2016, Updated 9:04 a.m. ET

GlaxoSmithKline’s 2Q16 revenues

As we’ve already seen, GlaxoSmithKline (GSK) reported a growth of 10.9% at 6.5 billion pounds in its 2Q16 revenues. This included an operational growth of 4% and a positive impact of foreign exchange due to the weakening of the sterling pound against all major currencies for developed countries.

Analysts are estimating growth of 17% in 3Q16 revenues and 13% in 4Q16 revenues.

The above graph shows GSK’s revenue trend and analysts’ estimates. In the rest of this series, we’ll look at some other factors that are affecting the company’s revenues.

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Segment-wise performance

GSK’s business is divided into the following three business segments:

  • Pharmaceuticals
  • Vaccines
  • Consumer Healthcare

Pharmaceuticals revenues have noticed a shift in product performance. The segment’s revenues have declined due to lower sales of key products Seretide and Advair. These were partially offset by increasing revenues from new products as well as HIV (human immunodeficiency virus) products Triumeq and Tivicay.

The divestment of its oncology business to Novartis (NVS) will have a negative impact on revenues as well as the profitability of this segment in the coming years. In 2Q16, Pharmaceuticals revenues increased ~2% to ~3.9 billion pounds compared to revenues of 3.5 billion pounds in 2Q15. We’ll look in more detail at products and therapeutic areas later in the series.

For the Vaccines segment, inorganic growth by acquisition of meningitis vaccines and other vaccines from Novartis in March 2015 has increased exposure and revenues for GSK’s Vaccines segment. Revenues for this segment have increased by ~17.9% to 960 million pounds in 2Q16. That compares to 814 million pounds in 2Q15. Although meningitis vaccines are adding to revenues, they have lower profit margins.

Consumer Healthcare revenues increased by more than 12% during 2Q16 to 1.7 billion pounds. That compares to 1.5 billion pounds for 2Q16. The increase was mainly due to the wellness and skin health franchise.

In order to divest risk, you can consider investing in the iShares US Healthcare (IYH), which holds ~10.9% of its investments in Johnson & Johnson (JNJ), 5.5% in Merck & Co. (MRK), and 4.2% in Amgen (AMGN).

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