GSK sees drop in earnings after asset swap with Novartis

This trend should reverse in 2016, with core earnings per share forecast to show double-digit growth.

Since GSK’s deal with Novartis, where it traded its oncology franchise for the Swiss company’s vaccines business, the multinational has become a lower margin company.

In sterling terms, sales rose 6 percent to 5.9 billion pounds (US$9.2 billion) in the three months ended June 30, reflecting the first full quarter that included products previously owned by Novartis.

Analysts on average had forecast sales of 5.9 billion pounds and core EPS, which excludes certain items, of 16.7p, according to Thomson Reuters. The pair also formed a joint venture, controlled by Glaxo, for their over-the-counter medicines, which also have lower margins than prescription pharmaceuticals.

CEO Andrew Witty described the performance as encouraging, with integration and restructuring plans on track.

GSK has missed earnings expectations in three of the four previous quarters, and while the company has been up against stiffer competition for Advair – a respiratory drug and one of its key revenue earners – the company said it expects a “significant recovery” in its core earnings per share next year.

New HIV treatments, Tivicay and Triumeq were the stand-outs generating sales of £294mln.

“Elsewhere, we saw continued strong uptake for Flonase OTC, an improving market share for Breo Ellipta following the indication for asthma granted in April, and continued uptake of the newly acquired Meningitis vaccines Bexsero and Menveo”. Growth in the new areas was now offsetting the decline in stalwarts Seretide and Advair, Witty said.

Longer-term hopes hinge on the company’s research pipeline and GSK said it had around 40 new drugs and vaccines in Phase II or Phase III clinical development.