GlaxoSmithKline plc
(
GSK
) performed disappointingly in the second quarter of 2012, missing
the Zacks Consensus Estimate both in terms of revenues and
earnings. Results were negatively impacted by a number of factors
including European austerity measures and weaker performance in the
US due to generic competition and discontinuation of certain
products.
Following the disappointing results, management at Glaxo lowered
their revenue guidance for 2012. The company now expects revenues
to remain flat year-over-year (at constant exchange rate) mainly
due to EU pricing pressure. Earlier, Glaxo was expecting revenues
to grow from 2011 levels.
We believe the current price reflects the negative news and are
reverting to a Neutral recommendation from Underperform. The stock
carries a Zacks #3 Rank (Hold rating) in the short run.
In addition to facing generic competition, most of Glaxo's
products face significant competition from small as well as large
pharmaceutical companies. Glaxo's Consumer Healthcare segment faces
competition from big companies like
Colgate-Palmolive
(
CL
),
Johnson & Johnson
(
JNJ
),
Procter & Gamble
(
PG
),
Pfizer
(
PFE
) and
Novartis
(
NVS
).
Although Glaxo continues to face challenges in the form of EU
pricing pressure, US health care reform, generic competition and
currency fluctuations, we are pleased with the company's efforts to
combat the situation by inking deals/making acquisitions. Glaxo has
also made significant progress with its late-stage pipeline.
We think the company possesses one of the stronger late-stage
pipelines in large-cap pharma. Late-stage candidates include Breo
(chronic obstructive pulmonary disease: regulatory review),
albiglutide (regulatory submission planned in early 2013),
dabrafenib (oncology: regulatory review), trametinib (oncology:
regulatory review) and sirukumab (rheumatoid arthritis, phase III
initiated in August 2012). The successful development and
commercialization of these candidates should boost the company's
top line.
COLGATE PALMOLI (CL): Free Stock Analysis
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GLAXOSMITHKLINE (GSK): Free Stock Analysis
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JOHNSON & JOHNS (JNJ): Free Stock Analysis
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NOVARTIS AG-ADR (NVS): Free Stock Analysis
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PFIZER INC (PFE): Free Stock Analysis Report
PROCTER & GAMBL (PG): Free Stock Analysis
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