How Is GlaxoSmithKline’s Growth Trending?
What Drove GlaxoSmithKline's Solid 1Q16 Results?
GlaxoSmithKline’s 1Q16 revenues
As discussed earlier, GlaxoSmithKline (GSK) reported a growth of 10.8%, or 6.2 billion pounds, in its 1Q16 revenues. This included an operational growth of 8% and the positive impact of foreign exchange due to the weakening of the pound against all major currencies in developed countries. Plus, analysts estimate a growth of 6.7% in 2Q16 revenues and 9.1% in 3Q16 revenues.
The above chart shows the revenue trend for GlaxoSmithKline. There are various factors affecting these revenues as we’ll discuss in the upcoming parts of this series.
Segment-wise performance
GSK’s business is divided into three business segments:
pharmaceuticals segment
vaccines segment
consumer health segment
The pharmaceuticals revenues have noticed a shift in the product performance, and the revenues have declined due to lower sales of key products Seretide and Advair, partially offset by increasing revenues from new products as well as HIV products Triumeq and Tivicay. Also, the divestment of its oncology business to Novartis (NVS) will have a negative impact on both revenues and profitability in this segment in the coming years. During 1Q16, the pharmaceuticals revenues increased ~1.8% to ~3.6 billion pounds, as compared to revenues of 3.5 billion pounds for 1Q16. Further details on the products and therapeutic areas are discussed later in the series.
For the vaccines segment, the inorganic growth by acquisition of meningitis vaccines and Novartis’s other vaccines portfolio in March 2015 has increased exposure and revenues for GSK’s vaccine segment. The revenues for the vaccines segment have increased by ~26.2% to 882 million pounds in 1Q16, as compared to 699 pounds in 1Q15. Although meningitis vaccines are adding to revenues, they have lower profit margins.
The consumer health revenues increased by over 27% during 1Q16 to 1.8 billion pounds, as compared to 1.4 billion pounds for 1Q16. The increase was mainly due to the wellness and skin health franchise.
Investors can consider the iShares US Healthcare (IYH), which holds ~11.0% of its investments in Johnson & Johnson (JNJ), 5.5% in Merck and Co. (MRK), and 4.3% in Amgen (AMGN) in order to divest the risk.
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