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Glaxo (GSK) Q1 Earnings Beat on COVID-19-Related Stockpiling
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GlaxoSmithKline plc (GSK - Free Report) reported first-quarter 2019 adjusted earnings of 97 cents per American depositary share, which beat the Zacks Consensus Estimate of 79 cents. Adjusted earnings were up 25% reportedly and 26% at constant exchange rate (“CER”) year over year.
Shares of Glaxo have declined 10.9% so far this year compared with the industry’s 0.8% decrease.
Quarterly revenues rose 19% on a reported basis as well as at CER to $11.74 billion (£9.1 billion), driven by strong performance across Vaccines and Consumer Healthcare segments. The top line beat the Zacks Consensus Estimate of $10.95 billion.
Glaxo reports financial figures under three segments: Pharmaceuticals, Vaccines and Consumer Healthcare.
Pharmaceuticals sales were up 6% at CER driven by growth in Respiratory and HIV segment, partially offset by sales decline at Established Pharmaceuticals segment. Moreover, additional demand and customer stock building in Europe and the United States due to COVID-19 pandemic toward the end of the quarter positively impacted sales of HIV and Respiratory products. However, sales in China were lower due to the pandemic. Sales in the United States were up 3%. Sales in European markets were up 15% at CER and 6% in international markets.
Respiratory sales were up 38% at CER, mainly driven by increase in sales of Trelegy Ellipta, Nucala and Relvar/Breo Ellipta across all markets. Nucala sales were up 38% at CER during the quarter. Sales of Nucala grew 33% and 38% in the United States and Europe, respectively. In the International markets, sales of Nucala increased 55%. Trelegy Ellipta sales more than doubled year over year driven by an increase in market share in the United States.
Relvar/Breo Ellipta registered growth of 32% in sales during the first quarter due to prior period RAR adjustment related to U.S. sales. Sales of Relvar/Breo Ellipta increased 45% in the United States. Sales of Relvar/Breo Ellipta increased 33% and 16% in European and international markets, respectively.
HIV sales were up 8% year over year at CER, benefiting from customer stock building. Sales of dolutegravir franchise were up 9%, while sales from remaining drugs, comprising 4% of HIV portfolio, declined 13% at CER.
The dolutegravir franchise comprises two three-drug regimens — Triumeq and Tivicay — and two two-drug regimens — Juluca and Dovato. Dovato was launched in the United States and Europe in 2019. The growth in sales of Juluca and Dovato in the first quarter more than offset the decline in sales of Triumeq.
Sales of the dolutegravir franchise were up 2% in the U.S. market and up 18% in Europe. Sales growth in these regions was driven by market-share growth of two-drug regimens and increased COVID-19 related customer stock building. In international markets, sales were up 25% at CER mainly driven by Tivicay. Please note that Glaxo markets Juluca in collaboration with J&J (JNJ - Free Report) .
Sales of Established Pharmaceuticals declined 6% due to lower sales of Advair and adverse impact of prior period RAR adjustments. Advair sales declined 40% year over year in the United States to $106 million while Seretide sales were down 3% in Europe due to generic competition. Sales of Ventolin were down1% in the U.S. market during the quarter.
We remind investors that launched several generic versions of Advair is available in the market including Mylan’s Wixela Inhub.
Immuno-inflammation drugs like Benlysta rose 24% in the quarter, with U.S. sales grew18%.
Oncology sales were £81 million, comprising sales of PARP inhibitor, Zejula, which was acquired from TESARO in 2019, compared with £66 million in the fourth quarter of 2019. In a separate press release, the company announced that the FDA has approved a label expansion of Zejula as first-line maintenance treatment for platinum-responsive advanced ovarian cancer patients, regardless of BRCA mutational status.
Consumer Healthcare Sales Up
Glaxo revised the category structure for this segment’s report from the first quarter of 2020. It now reports under five categories — Pain relief; Oral health; Respiratory health; Vitamins, minerals and supplements; and Digestive health and other.
Sales in the Consumer Healthcare segment increased 46% at CER, primarily driven by Pfizer’s (PFE - Free Report) legacy brands. Glaxo formed a new joint venture (“JV”) with Pfizer in August 2019 to create the world’s largest Consumer Healthcare business. Sales of Pain relief, Oral health and Respiratory health categories increased 68%, 13% and 51%, respectively, in the quarter. Sales of Vitamins, minerals and supplements category more than doubled in the first quarter. Digestive health and other category’s sales were up 31%
On a pro-forma basis, sales in the Consumer Health segment were up 11% at CER. We note that the impact of COVID-19 was mixed for this segment. Sales in a number of other markets including the United States, the United Kingdom and Australia benefited from increased demand while sales in India and China were adversely impacted due to government mandated retailer shutdowns.
Vaccines Segment Growth Continues
Sales from the Vaccines segment were impressive, up 19% at CER, primarily driven by strong growth of shingles vaccine, Shingrix and impressive performance of meningitis and influenza vaccines, partially offset by decline in sales of established vaccines. Shingrix sales increased 79% in the reported quarter, driven by strong uptake in the United States, with additional sales from Germany and Canada.
Bexsero sales increased 8% on the back of strong demand and favorable timing of tenders in Europe as well as market growth in the United States. Sales of another meningitis vaccine, Menveo were up 24% due to higher demand in U.S. and European markets. Sales of influenza vaccine Fluarix were up 53%, driven by strong demand in international markets. However, sales of Established vaccines were down 3% year over year.
Operating Expenses Up
Selling, general and administration (SG&A) costs increased 18% year over year to £2.8 billion. The rise in SG&A costs was driven by increased commercial activities to support launches and costs related to the acquisition of TESARO, partly offset by cost-saving initiatives and benefits of restructuring in Pharmaceuticals and Consumer Healthcare segments.
Research and development (R&D) expenses were up 11% to £1.1 billion, reflecting increased investments to support progress of clinical studies, especially those on Zejula. Glaxo has 37 new medicines, including 15 vaccines, in different development stages.
2020 Guidance
Based on its current assessment of the COVID-19 impact, Glaxo maintained its previous adjusted EPS guidance of a decline of 1% to 4% at CER year over year in 2020. However, the current situation remains uncertain due to the pandemic and the company plans to update its outlook later, if needed.
Our Take
Glaxo beat on earnings and sales in the first quarter. The company’s new products from every segment performed well in the reported quarter, especially Respiratory and Vaccines. However, sales of the company’s established drugs continued to decline. Meanwhile, the COVID-19 pandemic positively impacted sales of some drugs and consumer products, primarily the U.S. and European markets. However, the company stated that the current situation is uncertain and the ultimate severity, duration and impact of the pandemic remain unknown. The company will continue to assess the situation and update its impact whenever necessary.
Meanwhile, the company’s oncology segment is growing encouragingly, mainly on the back of strong demand for Zejula. With the approval in first-line maintenance treatment for advanced ovarian cancer, sales of Zejula will by boosted further.
Moreover, restructuring initiatives in the Consumer Health segment should help the company to offset the slowdown in sales of legacy drugs. However, loss of Advair sales due to generic competition and competitive pricing will continue to hamper revenues.
GlaxoSmithKline plc Price, Consensus and EPS Surprise
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Glaxo (GSK) Q1 Earnings Beat on COVID-19-Related Stockpiling
GlaxoSmithKline plc (GSK - Free Report) reported first-quarter 2019 adjusted earnings of 97 cents per American depositary share, which beat the Zacks Consensus Estimate of 79 cents. Adjusted earnings were up 25% reportedly and 26% at constant exchange rate (“CER”) year over year.
Shares of Glaxo have declined 10.9% so far this year compared with the industry’s 0.8% decrease.
Quarterly revenues rose 19% on a reported basis as well as at CER to $11.74 billion (£9.1 billion), driven by strong performance across Vaccines and Consumer Healthcare segments. The top line beat the Zacks Consensus Estimate of $10.95 billion.
Glaxo reports financial figures under three segments: Pharmaceuticals, Vaccines and Consumer Healthcare.
Respiratory Drugs Drive Pharmaceuticals Segment Sales
Pharmaceuticals sales were up 6% at CER driven by growth in Respiratory and HIV segment, partially offset by sales decline at Established Pharmaceuticals segment. Moreover, additional demand and customer stock building in Europe and the United States due to COVID-19 pandemic toward the end of the quarter positively impacted sales of HIV and Respiratory products. However, sales in China were lower due to the pandemic. Sales in the United States were up 3%. Sales in European markets were up 15% at CER and 6% in international markets.
Respiratory sales were up 38% at CER, mainly driven by increase in sales of Trelegy Ellipta, Nucala and Relvar/Breo Ellipta across all markets. Nucala sales were up 38% at CER during the quarter. Sales of Nucala grew 33% and 38% in the United States and Europe, respectively. In the International markets, sales of Nucala increased 55%. Trelegy Ellipta sales more than doubled year over year driven by an increase in market share in the United States.
Relvar/Breo Ellipta registered growth of 32% in sales during the first quarter due to prior period RAR adjustment related to U.S. sales. Sales of Relvar/Breo Ellipta increased 45% in the United States. Sales of Relvar/Breo Ellipta increased 33% and 16% in European and international markets, respectively.
HIV sales were up 8% year over year at CER, benefiting from customer stock building. Sales of dolutegravir franchise were up 9%, while sales from remaining drugs, comprising 4% of HIV portfolio, declined 13% at CER.
The dolutegravir franchise comprises two three-drug regimens — Triumeq and Tivicay — and two two-drug regimens — Juluca and Dovato. Dovato was launched in the United States and Europe in 2019. The growth in sales of Juluca and Dovato in the first quarter more than offset the decline in sales of Triumeq.
Sales of the dolutegravir franchise were up 2% in the U.S. market and up 18% in Europe. Sales growth in these regions was driven by market-share growth of two-drug regimens and increased COVID-19 related customer stock building. In international markets, sales were up 25% at CER mainly driven by Tivicay. Please note that Glaxo markets Juluca in collaboration with J&J (JNJ - Free Report) .
Sales of Established Pharmaceuticals declined 6% due to lower sales of Advair and adverse impact of prior period RAR adjustments. Advair sales declined 40% year over year in the United States to $106 million while Seretide sales were down 3% in Europe due to generic competition. Sales of Ventolin were down1% in the U.S. market during the quarter.
We remind investors that launched several generic versions of Advair is available in the market including Mylan’s Wixela Inhub.
Immuno-inflammation drugs like Benlysta rose 24% in the quarter, with U.S. sales grew18%.
Oncology sales were £81 million, comprising sales of PARP inhibitor, Zejula, which was acquired from TESARO in 2019, compared with £66 million in the fourth quarter of 2019. In a separate press release, the company announced that the FDA has approved a label expansion of Zejula as first-line maintenance treatment for platinum-responsive advanced ovarian cancer patients, regardless of BRCA mutational status.
Consumer Healthcare Sales Up
Glaxo revised the category structure for this segment’s report from the first quarter of 2020. It now reports under five categories — Pain relief; Oral health; Respiratory health; Vitamins, minerals and supplements; and Digestive health and other.
Sales in the Consumer Healthcare segment increased 46% at CER, primarily driven by Pfizer’s (PFE - Free Report) legacy brands. Glaxo formed a new joint venture (“JV”) with Pfizer in August 2019 to create the world’s largest Consumer Healthcare business. Sales of Pain relief, Oral health and Respiratory health categories increased 68%, 13% and 51%, respectively, in the quarter. Sales of Vitamins, minerals and supplements category more than doubled in the first quarter. Digestive health and other category’s sales were up 31%
On a pro-forma basis, sales in the Consumer Health segment were up 11% at CER. We note that the impact of COVID-19 was mixed for this segment. Sales in a number of other markets including the United States, the United Kingdom and Australia benefited from increased demand while sales in India and China were adversely impacted due to government mandated retailer shutdowns.
Vaccines Segment Growth Continues
Sales from the Vaccines segment were impressive, up 19% at CER, primarily driven by strong growth of shingles vaccine, Shingrix and impressive performance of meningitis and influenza vaccines, partially offset by decline in sales of established vaccines. Shingrix sales increased 79% in the reported quarter, driven by strong uptake in the United States, with additional sales from Germany and Canada.
Bexsero sales increased 8% on the back of strong demand and favorable timing of tenders in Europe as well as market growth in the United States. Sales of another meningitis vaccine, Menveo were up 24% due to higher demand in U.S. and European markets. Sales of influenza vaccine Fluarix were up 53%, driven by strong demand in international markets. However, sales of Established vaccines were down 3% year over year.
Operating Expenses Up
Selling, general and administration (SG&A) costs increased 18% year over year to £2.8 billion. The rise in SG&A costs was driven by increased commercial activities to support launches and costs related to the acquisition of TESARO, partly offset by cost-saving initiatives and benefits of restructuring in Pharmaceuticals and Consumer Healthcare segments.
Research and development (R&D) expenses were up 11% to £1.1 billion, reflecting increased investments to support progress of clinical studies, especially those on Zejula. Glaxo has 37 new medicines, including 15 vaccines, in different development stages.
2020 Guidance
Based on its current assessment of the COVID-19 impact, Glaxo maintained its previous adjusted EPS guidance of a decline of 1% to 4% at CER year over year in 2020. However, the current situation remains uncertain due to the pandemic and the company plans to update its outlook later, if needed.
Our Take
Glaxo beat on earnings and sales in the first quarter. The company’s new products from every segment performed well in the reported quarter, especially Respiratory and Vaccines. However, sales of the company’s established drugs continued to decline. Meanwhile, the COVID-19 pandemic positively impacted sales of some drugs and consumer products, primarily the U.S. and European markets. However, the company stated that the current situation is uncertain and the ultimate severity, duration and impact of the pandemic remain unknown. The company will continue to assess the situation and update its impact whenever necessary.
Meanwhile, the company’s oncology segment is growing encouragingly, mainly on the back of strong demand for Zejula. With the approval in first-line maintenance treatment for advanced ovarian cancer, sales of Zejula will by boosted further.
Moreover, restructuring initiatives in the Consumer Health segment should help the company to offset the slowdown in sales of legacy drugs. However, loss of Advair sales due to generic competition and competitive pricing will continue to hamper revenues.
GlaxoSmithKline plc Price, Consensus and EPS Surprise
GlaxoSmithKline plc price-consensus-eps-surprise-chart | GlaxoSmithKline plc Quote
Zacks Rank
Glaxo currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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