GlaxoSmithKline's first-quarter sales top estimates, boosted by demand for Shingrix

Headline results for the first quarter:

Prescription drug sales

4.2 billion pounds ($5.5 billion)

+4%

Revenue

7.7 billion pounds ($10.1 billion; forecasts of 7.5 billion pounds)

+6%

Profit

985 million pounds ($1.3 billion)

+30%

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

What the company said:

“We have made a strong start to 2019," remarked CEO Emma Walmsley, "with growth in sales, operating margins and earnings per share in Q1, in line with our expectations." The executive added that "strengthening our pipeline remains our number one priority."

"Shingrix has delivered another fantastic performance in the quarter," Walmsley said, with GlaxoSmithKline estimating that sales of the shingles vaccine will be "significantly" more than 1 billion pounds ($1.3 billion) this year.

Other results:

  • New respiratory product sales: 631 million pounds ($825 million), up 29 percent
    • Ellipta product sales: 479 million pounds ($626 million), up 24 percent, with strong growth in all regions, partly offset by competitive pricing pressures in the US
    • Nucala: 152 million pounds ($199 million), up 46 percent, boosted by the global rollout of the product
  • Established pharmaceuticals sales: 2.2 billion pounds ($2.9 billion), down 5 percent
  • Established respiratory product sales: 1.1 billion pounds ($1.4 billion), flat versus the prior year
    • Seretide/Advair: 486 million pounds ($635 million), down 14 percent, following loss of exclusivity in the US
  • Vaccine sales: 1.5 billion pounds ($2 billion), up 23 percent, mainly driven sales of Shingrix in the US, as well as increased demand for meningitis and hepatitis vaccines
    • Shingrix: 357 million pounds ($466 million), up from 110 million pounds ($144 million) in the prior year and above forecasts of 249 million pounds ($326 million), driven by continued strong launch execution in the US
  • HIV product sales: 1.1 billion pounds ($1.4 billion), up 7 percent
    • Triumeq: 614 million pounds ($802 million), up 1 percent
    • Tivicay: 383 million pounds ($500 million), up 10 percent
    • Juluca: 70 million pounds ($91 million)
  • Consumer healthcare sales: 2 billion pounds ($2.6 billion), flat versus the prior year

Looking ahead:

GlaxoSmithKline reaffirmed that it expects adjusted earnings per share to decline by 5 percent to 9 percent this year, hit by the 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.

What analysts said:

"The question is why it hasn't raised, or at least narrowed, its guidance range. We think it's playing it safe in case vaccines normalise and respiratory pressure intensifies," remarked Bloomberg Intelligence analyst Sam Fazeli. Meanwhile, Hargreaves Lansdown analyst Nicholas Hyett noted that GlaxoSmithKline "has again struggled to turn profits into cash," with free cash flow in the quarter dropping 50 percent to 165 million pounds ($216 million). However, Hyett said "investors should probably give [the company] the benefit of the doubt, at least for now."

"They are really refocusing into oncology and that's going to take some time - to make that transition - so I think it's going to be a difficult time for the pharma business," commented John Rountree of Novasecta.

Pipeline update:

GlaxoSmithKline disclosed that it ended Phase II development of the OX40 agonist GSK3174998, although a TLR combination study remains in Phase I.  Meanwhile, a next-generation Streptococcus pneumoniae vaccine has been removed from mid-stage development, with Phase I development of a universal influenza vaccine also stopped.

The company also noted that proof-of-concept data from a study investigating belantamab mafodotin, an antibody-drug conjugate targeting BCMA, in combination therapy for second-line multiple myleoma are now expected in the second half of the year, rather than the first half. GlaxoSmithKline said that the delay is not due to safety issues. Belantamab mafodotin, also known as GSK2857916, is being developed as part of a collaboration with Seattle Genetics.

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