GlaxoSmithKline's prescription drug sales drop 7 percent in third quarter

GlaxoSmithKline announced Wednesday that third-quarter sales of prescription drugs slipped 7 percent year-over-year on a constant exchange rate basis to 3.3 billion pounds ($5 billion), which the company noted mainly reflected the disposal of its oncology business to Novartis. Overall sales in the three-month period climbed 9 percent to 6.1 billion pounds ($9.3 billion), roughly in line with expectations, with revenue from vaccines jumping 32 percent on a constant exchange rate basis to 1.2 billion pounds ($1.8 billion).

CEO Andrew Witty commented "this quarter's performance reflects continued execution of our strategy," adding "the benefits of the recent three-part transaction [with Novartis] are becoming evident in our sales and earnings performance and we have made good progress on our restructuring and integration programmes during the quarter." According to Witty, sales of new drugs and vaccines reached 591 million pounds ($903 million), "more than offsetting the decline in Seretide/Advair sales...and demonstrating progress in transitioning to our new portfolio."

In the three-month period, revenue for GlaxoSmithKline's respiratory portfolio declined 9 percent to 1.3 billion pounds ($2 billion), with sales of Seretide/Advair falling by 19 percent to 794 million pounds ($1.2 billion). Meanwhile, Relvar Ellipta/Breo Ellipta amassed sales of 64 million pounds ($98 million), with revenue from Anoro Ellipta totalling 22 million pounds ($34 million).

Witty noted that "HIV remains the standout performer with sales increasing 65 percent" to 622 million pounds ($953 million)," reflecting continued strong momentum from Tivicay and Triumeq." For the three-month period, sales of Triumeq reached 211 million pounds ($323 million), topping analyst estimates, while Tivicay generated revenue of 157 pounds ($240 million). GlaxoSmithKline added that sales from its consumer health joint venture, in which the UK drugmaker holds a 63.5-percent stake, surged 55 percent to 1.6 billion pounds ($2.5 billion).

In the quarter, GlaxoSmithKline reported a profit of 538 million pounds ($824 million), up 34 percent on the year-ago period. Witty remarked "we remain focused on delivering sustained improvements in operational performance and are confident in our outlook for the rest of this year and a return to earnings growth in 2016." For the full year, the drugmaker continues to anticipate a high teens decline in earnings per share due to continued pricing pressure on Seretide/Advair in the US and EU, the dilutive effect of the Novartis transaction and the inherited cost base of the Novartis businesses. The company noted that the forecast does not reflect the recent divestment of ofatumumab to Novartis.

Commenting on the results, analysts at Merrill Lynch stated that the numbers "look strong," although drug sales were "a tad light" because of lower Advair/Seretide sales. "Nothing spectacular here, but it is a solid set of numbers versus low expectations, and excellent margin with a catalyst to come," the analysts said. Bernstein analyst Tim Anderson noted that profits were boosted by tight cost control, resulting in "the first green shoots of margin recovery." Meanwhile, Kepler Cheuvreux analyst Fabian Wenner cautioned "the beat clearly came from the integration" of Novartis' businesses, adding "the key concern remains that the existing portfolio of respiratory products is facing tougher and tougher times."

GlaxoSmithKline is scheduled to hold an investor day next week to provide an update on several of its investigational compounds. Witty indicated that the presentation will allow the company to highlight new drugs and vaccines "which we believe has significant potential to drive long-term performance."

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