GlaxoSmithKline plc
(
GSK
) recently announced that it is seeking to expand the label of
Synflorix in EU and has submitted a variation to the marketing
authorization application (MAA) for the same. Glaxo is looking to
get Synflorix approved for active immunization against pneumonia
caused by streptococcus pneumoniae in children aged between 6 weeks
and 5 years.
Synflorix is already approved for the above mentioned indication in
67 countries. Apart from this, Synflorix is also approved for
active immunization against invasive disease and acute otitis media
caused by streptococcus pneumoniae in children aged between 6 weeks
and 5 years in the EU and 90 other countries. As of now, Synflorix
is not approved in the US for any indication.
In the second quarter of 2012, Synflorix revenues were up 10% to
£101 million driven by strong performance in emerging markets and
Asia Pacific (EMAP) region.
We remind our investors that Glaxo performed disappointingly in the
second quarter of 2012. The company recorded earnings of 79 cents
per American Depository Share which were well below the Zacks
Consensus Estimate of 84 cents. Earnings fell 2.5% year over year.
Revenues decreased 7.3% year over year to $10.2 billion and came in
below the Zacks Consensus Estimate of $10.4 billion. Sales were
hurt by a number of factors including European austerity measures
and weaker performance in the US due to generic competition and
discontinuation of certain products.
We note that several products in Glaxo's portfolio including
Valtrex, Arixtra, Evoclin, Lamictal, Imitrex, Requip, Combivir and
Epivir are facing declining sales due to intense generic
competition. We expect the company's top line and gross margins to
remain under pressure in the coming quarters. The EU pricing
pressure will continue to affect sales.
Glaxo is looking to combat the threat of genericization of its key
products by signing deals and making acquisitions. The company is
focusing on increasing the rights on its partnered products and
promising pipeline candidates, so that it stands to benefit more
from their success.
Glaxo's acquisitions of Cellzome and Human Genome Sciences and
increasing investment in
Theravance Inc.
(
THRX
) and
Amicus Therapeutics
(
FOLD
) indicate its efforts to expand the pipeline.
Apart from this, Glaxo continues to make progress with its
cost-cutting initiative, which should help reduce the impact of
increasing generic competition over the next few years and
facilitate earnings growth.
Our Recommendation
We currently have an Underperform recommendation on Glaxo. The
stock carries a Zacks #3 Rank (Hold rating) in the short run.
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