GlaxoSmithKline profits drops by 30% in Q1 to £719 million

GlaxoSmithKline plc has suffered major setback during the first quarter ended March 2014 and its profits as well as net sales declined due to lower sales in US by over 10 per cent. The company’s net profit declined by 30.1 per cent to £719 million from £1,029 million in the similar period of last year. Its net sales also declined by 13.3 per cent to £5,613 million from £6,471 million. With lower net profit its EPS declined to 13.7 pence from 19.6 pence in the last period.

Its pharmaceutical sales declined by 4 per cent to £3,828 million, but that of vaccines increased by 3 per cent to £658 million. The sales of consumer healthcare remained flat at £1,127 million. Its pharmaceutical and vaccines sales improved in Europe by 3 per cent to £1,024 million and that in Japan moved up by 13 per cent to £285 million. Its US sales declined sharply by 10 per cent to £1,130 million. Sales of established products also declined by 11 per cent to £814 million. GSK’s R&D expenditure declined by 4 per cent to £784 million compared with £855 million in Q1 2013. These reflected the completion of a number of large trials and the phasing of ongoing project spending as well as continuing cost management.

Andrew Witty, CEO, said, “This quarter has amply demonstrated the very significant changes that are underway in GSK’s portfolio. 0ur strategy to broaden the company’s sales base is evidenced with the transition we are making to new products in our core franchises of respiratory and HIV, further R&D delivery and the 3-part transaction we announced last week with Novartis.

For the quarter, Group sales were down 2 per cent despite growth in Pharmaceuticals and Vaccines sales in all major regions except the US. Consumer Healthcare sales, flat at £1.1 billion, were impacted by some temporary supply interruptions to certain products in the US and Europe. Outside of the US, we saw continued momentum across pharmaceuticals and vaccines with sales growth in emerging markets, Europe and Japan. Consumer healthcare sales in Rest of World markets were also strong, up 6 per cent to £0.6 billion.

Despite the decline in sales, core earnings per share for the quarter grew 2 per cent CER to 21 pence. This reflected the diversity of the Group, benefits from ongoing restructuring and effective cost control, together with further delivery of financial efficiencies in both interest and tax charges. We continue to expect further structural cost savings to be delivered in the second half of the year.”

Oncology products contributed strongly to the quarter, with sales up 31 per cent £108 million, benefiting from strong performances from Votrient and Promacta, and recent launches of Tafinlar and Mekinist. Benlysta sales grew by 33 per cent. ViiV Healthcare turnover improved by 4 per cent to £311 million as the growth generated by Epizicom and the recent launch of Tivicay.

In 2014, GSK expects core EPS growth of 4.8 per cent and it also expect to grow sales at constant exchange rates and on an ex-divestment basis.