GSK's vaccine unit sees revenue, profit jump in Q3
|GSK CEO Andrew Witty|
After struggling out of the gate with Novartis' ($NVS) vaccines in hand, GlaxoSmithKline's ($GSK) vaccines unit turned its fortune in the third quarter and was able to deliver considerable increases in sales and profits.
For the first and second quarters of the year, the unit saw operating profit fall by 31% and 32% respectively. Partly to blame, CEO Andrew Witty said following the Q1 results, was a "higher than anticipated" cost base following GSK's multibillion-dollar asset swap with Novartis in which it sent off its oncology portfolio and received the Swiss pharma's vaccines stall. However, in Q3, due to sales of newly acquired products, improved flu vaccine supply in the U.S. and other factors internationally, the unit was able to deliver for GSK.
In total, vaccines sales grew 32% to £1,181 million, driven by a U.S. increase of 42%, an increase in Europe of 31% and international sales increases of 22%. GSK was able to grow its U.S. sales through an improved supply of flu vaccines and thus an accelerated delivery schedule, "creating the opportunity to take share and improve pricing," Witty said on the Q3 call, combined with a 57% increase in Rotarix revenues due to CDC orders. In Europe, the company benefited from Bexsero sales increases on the heels of the decision by England's National Health Service earlier this year to include it in the nation's immunization program. Worldwide, the unit posted £464 million in core operating profit on the quarter.
The results are important for Witty, who has steered GSK away from costly drugs and instead toward low-margin products such as vaccines and consumer healthcare. Much of the burden is due to flailing pharma revenue as the effects of pricing pressure and generics take their toll on aging respiratory behemoth Advair.
On the R&D front, GSK hosted an investor event on Tuesday focused on its pipeline; it said it aims to file 20 new drugs for approval within 5 years. Shingles vaccine Shingrix was listed as a near- to mid-term R&D focus, and on the Q3 call Witty described it as potentially a "very, very substantial vaccine for the company." Last week, GSK reported a Phase III success for the jab, which demonstrated 90% efficacy in adults aged 70 and older. Also last week, however, GSK's malaria vaccine encountered an obstacle when the World Health Organization called for the vaccine to be used in pilot projects--which can take up to 5 years to complete--before the company launches a widespread campaign.
- here are GSK's Q3 results (PDF)
- and a call transcript from Seeking Alpha
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