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GSK 2Q16 Earnings: Did Pharmaceuticals Grow?

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Jul. 25 2016, Updated 8:07 a.m. ET

The Pharmaceutical segment

GlaxoSmithKline’s (GSK) Pharmaceuticals segment has declined substantially in 2015 due to the divestment of its oncology business to Novartis (NVS) in March 2015. Excluding the impact of the divestment, revenues are expected to increase during 2Q15 following increased sales of HIV products Triumeq and Tivicay and new pharmaceutical products. They are expected to be partially offset by lower sales of Seretide and Advair.

Overall, the Pharmaceutical segment’s contribution to total revenues is around 60% of total revenues. The Pharmaceuticals segment is classified into two franchises:

  • HIV Products – classified under ViiV Healthcare
  • Global Pharmaceuticals – deals with respiratory, cardiovascular, metabolic and urology, immuno-inflammation, and established products
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HIV Products

HIV Products are marketed under ViiV Healthcare, a company of which GSK, Pfizer (PFE), and Shionogi are shareholders. New products Tivicay and Triumeq showed strong performance for 1Q16, and HIV Products revenues increased by 57% during 1Q16. Analysts expect the revenues of HIV Products to grow in 2Q16 and the coming quarters. Epzicom and Kivexa were also significant contributors towards HIV revenues.

Tivicay competes with Gilead Sciences’ (GILD) Stribild, while Triumeq competes with Gilead’s and Bristol-Myers Squibb’s (BMY) jointly developed Atripla.

Global Pharmaceuticals

The Global Pharmaceuticals franchise deals with respiratory, cardiovascular, metabolic and urology, immuno-inflammation, and established products.

  • In the respiratory space, drugs Seretide and Advair are losing their market share to generic competition. Overall, the respiratory franchise is expected to report a decline in revenues during 2Q16.
  • In the cardiovascular and metabolic and urology spaces, drugs Duodart and Jalyn have performed strongly, while Avodart, one of GSK’s key products, has been exposed to generic competition since October 2015. Analysts expect the company will report a decline in revenues for this franchise during 2Q16.
  • In the immuno-inflammation space, the new drug Benlysta is driving growth. The revenues for this franchise and for the new drug Benlysta are expected to grow for 2Q16.
  • The established products space is expected to report declining revenues, as many products are losing their market share to generic competition.

Other pharmaceuticals include key products Augmentin, Relenza, dermatology products, and rare disease products. The revenues for this area will decrease due to lower sales of Augmentin and the dermatology and rare disease products. They will be partially offset by a strong performance by Volibris. To divest risk, investors could consider ETFs such as the Vanguard FTSE Europe ETF (VGK), which has a 1.3% exposure to GlaxoSmithKline.

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