GlaxoSmithKline sees declining earnings in 2019 following FDA approval of Advair generic

Headline results for the fourth quarter:

Prescription drug sales 

4.8 billion pounds ($6.2 billion)

+6%

Revenue

8.2 billion pounds ($10.6 billion; forecasts of 8 billion pounds)

+7%

Profit

1.4 billion pounds ($1.6 billion; forecasts of 1.9 billion pounds)

442 million pounds ($573 million)

Note: All changes are versus the prior-year period unless otherwise stated

What the company said:

CEO Emma Walmsley noted that the company "delivered improved operating performance in 2018 with group sales growth, strong commercial execution of new product launches, especially Shingrix, continued cost discipline and better cash generation."

Other results:

  • Respiratory product sales: 2 billion pounds ($2.6 billion), up 5 percent
    • Seretide/Advair: 647 million pounds ($839 million), down 18 percent, but ahead of forecasts of 592 million pounds ($767 million), declining in the US due to increased competitive pricing pressures and in Europe as a result of generic competition
    • Ellipta product sales: 654 million pounds ($848 million), up 36 percent, driven by continued growth in all regions
    • Nucala: 173 million pounds ($224 million), up 43 percent, continuing to benefit from the global rollout of the product
  • Established pharmaceuticals sales: 1.4 billion pounds ($1.8 billion), up 1 percent
  • HIV product sales: 1.3 billion pounds ($1.7 billion), up 10 percent
    • Triumeq: 691 million pounds ($896 million), up 5 percent
    • Tivicay: 452 million pounds ($586 million), up 14 percent
    • Juluca: 62 million pounds ($80 million)
  • Vaccine sales: 1.5 billion pounds ($1.9 billion), up 22 percent
    • Shingrix: 221 million pounds ($286 million), with growth primarily in the US and Canada, driven by demand and share gains
  • Consumer healthcare sales: 1.9 billion pounds ($2.5 billion), up 1 percent
  • Full-year prescription drug sales: 17.3 billion pounds ($22.4 billion), flat versus the prior year
  • Full-year revenue: 30.8 billion pounds ($39.9 billion), up 2 percent
  • Full-year profit: 4.8 billion pounds ($6.2 billion), up 36 percent

Looking ahead:

GlaxoSmithKline expects adjusted earnings per share to decline by 5 percent to 9 percent this year, hit by the recent FDA approval of Mylan's Wixela, the first generic version of the Advair Diskus inhaler approved in the US. The company noted that the guidance also reflects the impact of the acquisition of Tesaro for about $5.1 billion in cash, as well as the expected divestiture of its consumer nutrition business and the merger of its consumer healthcare business with Pfizer this year.

The earnings report comes the day after GlaxoSmithKline announced an agreement potentially worth up to 3.7 billion euros ($4.2 billion) to jointly develop Merck KGaA's experimental immunotherapy M7824 (bintrafusp alfa) in a number of cancer types. Walmsley said "the...alliance is a perfect example of the kind of thing that we shall continue to look for," adding "I have always [been] absolutely clear that the number one priority is to strengthen the pipeline."

What analysts said:

Analysts at Jefferies noted that despite the projected decrease in earnings, GlaxoSmithKline's forecast should be well received by investors because a double-digit decline was anticipated.

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