Of GSK’s Business Segments, This One Is the Sales Laggard


Sep. 12 2016, Updated 8:05 a.m. ET

GlaxoSmithKline’s business segments

GlaxoSmithKline’s (GSK) business is divided into three business segments:

  • pharmaceuticals
  • vaccines
  • consumer health

The company reported a growth of 10.9% in its revenues to 6.5 billion pounds for 2Q16. The growth was driven by an increase in revenues across the vaccines and consumer healthcare segments, partially impacted by the lower sales of certain products in the pharmaceutical franchise, which we’ll discuss later in the series.

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Segment-wise performance

The pharmaceuticals revenues have seen a shift in product performance, and the revenues have fallen due to lower sales of key products Seretide and Advair, partially offset by increasing revenues from new products as well as HIV products Triumeq and Tivicay. Also, the divestment of the company’s oncology business to Novartis (NVS) will have a negative impact on both revenues as well as the profitability of this segment for coming years. During 2Q16, the pharmaceuticals revenues rose ~2% to ~3.9 billion pounds as compared to revenues of 3.5 billion pounds for 2Q15.

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

The consumer health revenues increased by over 12% during 2Q16 to 1.7 billion pounds as compared to 1.5 billion pounds for 2Q16. The increase was mainly due to the wellness and skin health franchise.

Investors can consider the SPDR MSCI EAFE StrategicFactors ETF (QEFA), which is focused on mid-cap and large-cap companies from Europe, Australasia, and Far East countries. The ETF holds ~1.4% of its investments in GlaxoSmithKline, 1.3% in Novo Nordisk (NVO), 2.3% in Novartis (NVS), and 1.0% in AstraZeneca (AZN).


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