GSK's vax revenues jump in 2015 while profit, margin slip

Thanks to flailing pharma revenues and its decision to ship away its oncology assets, GlaxoSmithKline ($GSK) has a lot riding on vaccines. And in 2015, the unit delivered with 19% revenue growth, although profit and operating margin both fell.

At £3.7 billion ($5.38 billion), GlaxoSmithKline's vaccines revenue contributed 16% of the company's total 2015 haul. The unit brought in £966 million ($1.4 billion) in profit--a 9% decrease from 2014--with an operating margin of 26.4%, 5.2% lower than in 2014. GSK cited the additional Novartis ($NVS) vaccines cost base as the driver for the lower margin.

On the year, GSK's vaccines unit saw 21% growth in Fluarix/FluLaval sales, 14% growth from Rotarix and £275 million ($400 million) in new sales from Menveo and Bexsero, picked up from Novartis. Cervarix, Infanrix, Pediarix and hepatitis A vaccines all delivered lower sales than in 2014.

GSK CFO Simon Dingemans

The results come about one year into GlaxoSmithKline's integration of the former Novartis vaccines portfolio following their massive asset swap. GlaxoSmithKline, in sending away its oncology assets and receiving Novartis' vaccines portfolio, will continue to lean on vaccines for growth in the coming years. Added to that is the fact that pharma sales continue to slip thanks in part to patent losses for respiratory blockbuster Advair; that unit's sales fell 14% in 2015.

On the company's Q4 conference call, CFO Simon Dingemans said an ongoing economic slowdown has impacted vaccines demand, "with a number of governments cutting back funding for immunization programs." He said the impact "is not expected to improve in the near term." GSK expects growth from its meningitis vaccines in 2016, he added, with the vaccines unit as a whole expected to produce mid- to high-single-digit growth "in the medium term" through supply expansion and the launch of Shingrix.

Shingrix, the company's shingles vaccine poised to steal market share from Merck's ($MRK) Zostavax, has been hailed as a potential "major market disrupter" by GSK vaccines head Moncef Slaoui.

- here's the release (PDF)
- and the Q4 call transcript from Seeking Alpha

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