GlaxoSmithKline plc ( GSK Quick Quote GSK - Free Report) reported first-quarter 2021 adjusted earnings of 63 cents per American depositary share (“ADS”), in line with the Zacks Consensus Estimate. However, adjusted earnings were down 39% year over year on a reported basis and 33% at constant exchange rate (“CER”), reflecting the impact of lower sales.
Quarterly revenues declined 18% on a reported basis and 15% at CER to $10.24 billion (£7.42 billion), missing the Zacks Consensus Estimate of $10.66 billion. Revenues declined significantly from continued disruptions due to the COVID-19 pandemic. The prioritization of COVID-19 vaccination, especially in the United States and the United Kingdom, hurt sales of Glaxo’s vaccines during the quarter. Moreover, prior-year quarter sales had benefited from stock build-up during the onset of the pandemic which posed unfavorable comparision in first quarter of 2021. However, the company expects healthcare systems and consumer trends to approach normality in the second half of the year and drive its revenues in the rest of the year.
Shares of Glaxo have gained 2.4% so far this year compared with the
industry’s 2.1% increase.
Glaxo reports financial figures under three segments: Pharmaceuticals, Vaccines and Consumer Healthcare.
Respiratory Business Remains Strong
Pharmaceuticals sales were down 8% at CER as higher sales of newer drugs were more than offset by decline in sales of antibiotics, HIV drugs and Established drugs. Excluding the impact of Established Pharmaceuticals segment, Pharmaceuticals sales grew 3% year over year at CER. Stock build-up in the prior-year quarter accounted for approximately 4% of decline in sales. Moreover, demand for antibiotic products in Europe and International markets was tepid.
Sales in the United States were up 4%. Sales in European and International markets were down 18% and 14%, respectively, at CER.
Respiratory sales were up 24% at CER mainly driven by an increase in sales of Anoro, Trelegy, and Nucala across all markets. Nucala sales were up 26% at CER during the quarter. Trelegy Ellipta sales surged 35% year over year driven by strong growth in all regions.
Sales of Anoro Ellipta increased 4% at CER while Relvar/Breo Ellipta registered decline of 3% in sales during the first quarter.
HIV sales decreased 11% year over year at CER mainly due to stock build-up in the year-ago quarter plus decline in sales of mature drugs. Sales of dolutegravir franchise were down 11%, while sales from legacy drugs declined 26% at CER. Meanwhile, the company launched a long-acting HIV treatment, Cabenuva, during the first quarter that generated sales of $2 million.
The dolutegravir franchise comprises two three-drug regimens — Triumeq and Tivicay — and two two-drug regimens — Juluca and Dovato. Strong growth in sales of Dovato in the first quarter was more than offset by decline in sales of three-drug regimens and Juluca.
Sales of the dolutegravir franchise were down 11% at CER in the U.S. market and 10% in Europe. In International markets, sales were down 15% at CER. Please note that Glaxo markets Juluca in collaboration with
J&J ( JNJ Quick Quote JNJ - Free Report) .
Sales of Established Pharmaceuticals declined 17%, reflecting generic competition, lower demand for antibiotics and stock build-up in the prior-year quarter. Advair/Seretide sales declined 8% year over year due to generic competition in all markets.
Sales of immuno-inflammation drugs like Benlysta rose 25% in the quarter, reflecting the impact of label expansion of the drug for treating active lupus nephritis in the United States and Japan.
Oncology sales, comprising sales of Zejula and Blenrep, were up 38% year over year.
Consumer Healthcare Sales Down
Sales in the Consumer Healthcare segment decreased 16% at CER due to loss of sales from divested brands and weaker sales of Respiratory health segment. Glaxo formed a new joint venture (“JV”) with
Pfizer ( PFE Quick Quote PFE - Free Report) in August 2019 to create the world’s largest Consumer Healthcare business. On a pro-forma basis, sales in the Consumer Health segment declined 9%.
Sales of Pain relief and Oral health categories decreased 8% and 1%, respectively, in the quarter. Sales of Vitamins, minerals and supplements category were down 1% in the first quarter. Sales of Respiratory health declined 42%. Digestive health and other category sales remained flat.
COVID-19 Vaccination Hurts Shingrix Sales
Sales from the Vaccines segment were down 30% at CER. Shingrix sales declined 47% in the reported quarter due to lower demand in the United States as a result of prioritized focus on COVID-19 mass vaccination. However, the decline was partly offset by continued strong performance momentum in Germany and the launch in China.
In Meningitis vaccines, Bexsero sales decreased 16% while sales of Menveo were up 2%. Sales of influenza vaccine Fluarix were down 5%. Sales of Established vaccines were down 23% year over year.
Selling, general and administration (SG&A) costs decreased 15% at CER year over year to £2.32 billion. The decline in SG&A costs was led by cost savings from restructuring and reduced variable spending due to COVID-19 related restrictions
Research and development (R&D) expenses rose 3% at CER to £1.1 billion, reflecting higher clinical activity in the oncology and COVID-19 therapy programs.
2021 Guidance Maintained
Glaxo maintained its previous guidance for adjusted earnings to decline in 2021 by mid- to high-single digit percentage at CER.
The company expects normalcy to return in the second half of 2021. It anticipates full-year sales for the Pharmaceutical segment to remain flat to up in low-single digit percentage. Sales of Consumer Healthcare segment is expected to increase by low to mid-single digits, excluding brands divested/under review.
Meanwhile, the company expect disruption in the vaccine segment to continue in the first half of 2021 due to prioritization of COVID-19 vaccination programs and the resurgence of the pandemic in late 2020. For the full year, the company expects sales of the vaccine segment to remain flat to up in low-single digit percentage on the back of anticipated strong growth of Shingrix in the second half.
Glaxo first-quarter earnings matched estimates while sales missed the same, reflecting COVID-19 related disruptions across all markets. Meanwhile, loss of Advair sales due to generic competition and competitive pricing will continue to hamper revenues. However, the company’s new products in the Respiratory and Oncology segment, and two-drug HIV regimens continued to perform well in the reported quarter. Meanwhile, sales of the company’s established drugs continued to decline.
Meanwhile, the company remains on track with its plan to separate itself into two separate companies — one focusing on Biopharma and another on Consumer Health — by 2022 to deliver sustainable growth and returns to shareholders.
Zacks Rank & Stock to Consider
Glaxo currently carries a Zacks Rank #3 (Hold).
A better-ranked company from the biotech sector is
Avid Bioservices, Inc. ( CDMO Quick Quote CDMO - Free Report) , carrying a Zacks Rank #2 (Buy). Earnings estimates for 2021 and 2022 have risen 80% and 53.8%, respectively, over the past 30 days. The stock has risen 89.2% so far this year. These Stocks Are Poised to Soar Past the Pandemic
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