GSK’s 2Q17 Earnings: Global Pharmaceuticals



Global Pharmaceuticals franchise

GlaxoSmithKline’s (GSK) Global Pharmaceuticals business is a part of the Pharmaceuticals segment, comprising the largest revenue contributor for the company. The Global Pharmaceuticals business includes products from the Immuno-inflammation franchise, Respiratory franchise, as well as its Established products franchise.

The chart below shows revenues for some of the key products in Global Pharmaceuticals. This franchise reported revenues of ~3.2 billion pounds in 2Q17.

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Performance of each franchise

Let’s look at the performance of each franchise in the Global Pharmaceuticals segment.

The Respiratory franchise reported 4.0% growth in revenues at constant exchange rates to 1.8 billion pounds during 2Q17. This growth was driven by strong performance of the drugs Relvar/Breo Ellipta, Nucala, Incruse Ellipta, Anoro Ellipta, and Arnuity Ellipta. On the other hand, this growth was partially offset by lower sales of the drugs Seretide/Advair, Avamys/Veramyst, and Flovent as a result of the generic competition.

The Immuno-inflammation franchise, represented by the drug Benlysta, reported 9.0% growth in revenues at constant exchange rates to 93.0 million pounds during 2Q17.

The Established Pharmaceuticals franchise reported a 7.0% decline in revenues at constant exchange rates to ~1.5 billion pounds during 2Q17. The decline was mainly due to the recent divestments of the Romanian distribution business during 4Q16, as well as divestment of its thrombosis and anesthesia business to Aspen Technology (AZPN) during 1Q17. These divestments impacted overall revenues for Established Pharmaceuticals by nearly 4.0%.

Apart from the divestments, the Avodart franchise reported a decrease of 19.0% at constant exchange rates to 160.0 million pounds during 2Q17, mainly due to the loss of exclusivity in the US markets.

The revenues for Dermatology products, classified under the Established Pharmaceuticals franchise, reported 17.0% growth at constant exchange rates during 2Q17. The revenues increased following the improvements in supply to the emerging markets.

The revenues for Augmentin fell 1.0% at constant exchange rates, while due to the positive impact of foreign exchange, reported 5.0% growth in revenues to 141.0 million pounds during 2Q17.

To divest company-specific risks, investors can consider ETFs like the Vanguard FTSE Europe ETF (VGK), which holds 1.5% of its total assets in GlaxoSmithKline. VGK also holds 1.5% of its total assets in Novartis (NVS), 0.8% in Sanofi (SNY), and 0.6% in Novo Nordisk (NVO).


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