GlaxoSmithKline plc (ADR) (symbol GSK on New York; www.gsk.com) is a U.K.-based global health care company that develops, makes and sells products in three main markets: pharmaceuticals, vaccines and consumer. It has about 98,000 employees.
In the three months ended December 31, 2014, Glaxo’s sales fell 10.4%, to 6.19 billion pounds ($9.39 billion U.S.) from 6.91 billion pounds. Earnings per share declined 5.9%, to 27.3 pence ($0.41 U.S.) from 29.0 pence.
The drop mainly resulted from drugs losing their patent protection and facing generic competition. Examples include Valtrex (herpes), Imitrex (migraines), Requip (Parkinson’s disease), Combivir (HIV) and Epivir (antiviral).
Meantime, the company’s blockbuster drug Advair (for chronic obstructive pulmonary disease and asthma) continues to lose salesafter coming off-patent in key markets. At one time, Advair supplied 20% of Glaxo’s revenue, but this year it could shed 20% of its U.S. sales to cheaper generics.
Glaxo sells its oncology business to Novartis for $16 billion
Glaxo must also deal with several other drugs losing patent protection over the next few years, including Epzicom and Trizivir (2016) and Lexiva (2018), as well as vaccines like Infanrix (2016) and Boostrix (2017).
In early March 2015, the company completed a major deal that saw it transfer its oncology business to Switzerland-based Novartis AG for $16 billion.
The agreement also had two other components: the transfer of Novartis’s vaccine unit to Glaxo for $7 billion and the creation of a consumer health care joint venture that includes well-known Glaxo brands like Nicorette and Nicoderm (for quitting smoking), Aquafresh (toothpaste) and Abreva (cold sore treatment).
Glaxo also received after-tax proceeds of $7.8 billion from the transaction.
The company hopes these moves will let it focus on its more profitable—and more promising—products.
Meanwhile, drugs currently in its pipeline face mixed prospects. Two have already had disappointing Phase III results: darapladib (chronic coronary heart disease) and drisapersen (Duchenne muscular dystrophy).
Glaxo trades at 18.7 times this year’s forecast earnings of $2.50 per ADR. The ADRs yield a very high 5.9%, but the company’s high dividend rate may not be sustainable.
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GlaxoSmithKline plc (ADR) (symbol GSK on New York; www.gsk.com) is a U.K.-based global health care company that develops, makes and sells products in three main markets: pharmaceuticals, vaccines and consumer. It has about 98,000 employees.
