GlaxoSmithKline ( GSK ) reported first
quarter earnings of 61 cents per ADS, missing the Zacks Consensus
Estimate of 77 cents and the year-ago earnings of 87 cents per ADS.
Revenues declined 2% year over year at constant exchange rates
(CER) to $10.1 billion. Revenues were in line with the Zacks
Consensus Estimate. Revenues primarily declined due to divestment
of Vesicare and non-core over-the-counter (OTC) brands.ASTELLAS PHARMA (ALPMY): Get Free ReportCATALYST PHARMA (CPRX): Free Stock Analysis
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All growth rates mentioned below are on a year-on-year basis and
The Quarter in Detail
The company operates through two segments: Pharmaceuticals and
Vaccines and Consumer Healthcare. Pharmaceuticals and Vaccines
sales dropped 2% while Consumer Healthcare sales inched up 1%.
Pharmaceuticals revenues fell 1% primarily due to the divestiture
of Vesicare to Astellas Pharma Inc. ( ALPMY ) following the
conclusion of their co-promotion agreement in the first quarter of
2012. Vaccines revenues decreased 11%. Revenues in the first
quarter of 2013 were boosted by the HPV (human papillomavirus
virus) vaccination program in Japan.
The Pharma and Vaccines segment performed well only in the
Emerging Markets and Asia Pacific (EMAP) market with sales rising
8% there. Segmental sales were disappointing in all other areas
including Japan (8%), US (6%) and Europe (3%).
In the Consumer Healthcare division, growth in Oral Care (5%),
Nutrition (6%) and Skin Health (6%) was partially offset by a
decline in the Total Wellness (5%) segment. Sales increased in the
US (3%) and Rest of the World (5%) and decreased in Europe
The company bought back shares worth £52 million during the first
quarter of 2013. Share repurchases in 2013 are expected in the
range of £1 - £2 billion.
The company declared an interim dividend of about 55 cents per
The company remains on track to deliver £2.8 billion (of which
£2.6 billion has already been realized) in annual savings under its
restructuring program by 2014. Glaxo initiated a new major change
program which focuses on restructuring the company's business in
Europe, improving efficiency in supply process, manufacturing and
research and development (R&D). The program is expected to
yield annual savings of at least £1 billion by 2016.
Glaxo still expects to report revenue growth of approximately 1%
(at CER) with core earnings growth of 3%-4% for 2013 from the
year-ago period. The company is working hard to develop its
pipeline. Multiple pipeline related news is expected in the coming
We are pleased with Glaxo's efforts to control cost and
restructure operations. We are also encouraged by the progress in
Glaxo's pipeline. However, we remain concerned about the challenges
faced by the company in the form of generic competition.
Glaxo carries a Zacks Rank #3 (Hold) in the short run. Companies
that currently look attractive include UCB ( UCBJF ) and
Catalyst Pharmaceuticals Partners Inc. ( CPRX ). Both stocks
carry a Zacks Rank #1 (Strong Buy).