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Analyzing GlaxoSmithKline’s Global Pharmaceutical Performance

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Global pharmaceuticals

The global pharmaceuticals segment is the largest revenue contributor for GlaxoSmithKline (GSK). Global pharmaceuticals include various products including respiratory, immuno-inflammation, and established products.

The global pharmaceutical segment reported revenues of 3,204 million pounds in 1Q17. The above chart shows revenues for some of the key products in the global pharmaceuticals division.

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Performance of each franchise

  • For the respiratory franchise, drugs Seretide/Advair and Flovent are losing their market share to the generic competition. Overall, the respiratory franchise reported a 5% increase in revenues to 1.7 billion pounds at constant exchange rates during 1Q17. The growth was driven by new drugs including Ellipta, Nucala, Ventolin, Anoro Ellipta, and Avamys.
  • For the immuno-inflammation franchise, the new drug Benlysta is driving growth. Benlysta sales improved ~22% at constant exchange rates, while the franchise sales improved 23% at constant exchange rates during 1Q17.
  • Various products in the established pharmaceuticals franchise are losing their market share to generic competition and reported a decrease in revenue of 6% at constant exchange rates during 1Q17 due to the lower sales across international markets. This segment includes the cardiovascular, metabolic, and urology franchise, established products, and other pharmaceuticals.
  • Revenues from the cardiovascular, metabolic, and urology franchise rose 3% at constant exchange rates to 216 million pounds, mainly driven by an increase of 6% at constant exchange rates in Avodart sales to 160 million pounds.
  • The revenues for established products fell 5% at constant exchange rates to 640 million pounds due to the lower sales of Coreg, Requip, Seroxat, Valtrex, and Zeffix, offset by increased sales of Imigran, Lamictal, and Serevent.

The other pharmaceuticals franchise includes some key products like Augmentin, Relenza, Dermatology products, and rare disease products. The revenues for this franchise fell 11% at constant exchange rates during 1Q17, following lower sales for antibacterials and oncology products, partially offset by the strong performance of Augmentin, dermatology, and rare disease products.

To divest the risk, investors can consider ETFs like the VanEck Vectors Pharmaceutical ETF (PPH), which holds 5.1% of its total assets in GlaxoSmithKline. PPH also holds 10.3% of its total assets in Johnson & Johnson (JNJ), 5.2% in Merck (MRK), and 6.8% in Pfizer (PFE).

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