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LONDON (Alliance News) - GlaxoSmithKline PLC Wednesday posted a drop in pretax profit for 2014, hit by lower revenue for asthma and chronic obstructive pulmonary disease treatment Advair, and said that it was continuing to evaluate the possibility of an initial public offering for a minority stake in its HIV joint venture ViiV Healthcare.
The company also sweetened the news for shareholders by raising its total dividend to 80 pence from 78 pence a year before, pledging to maintain this dividend level for 2015, and reiterating plans to return GBP4 billion of net proceeds from its transaction with Novartis to shareholders in 2015.
Glaxo agreed a three-part deal with Novartis last year to sell the Swiss company its its oncology portfolio, buy Novartis' global vaccines business, and create a joint consumer healthcare business.
The company said that the Novartis transaction is on track to be completed in the first half of 2015, and following this completion the company is planning to detail its 2015 outlook at an investor day.
Although Glaxo provided no further specific details on the potential ViiV initial public offering, Chief Executive Andrew Witty told journalists Wednesday afternoon that Glaxo expects to make a decision on this by the middle of 2015, and if it were to go ahead it would not be likely to happen until 2016. Glaxo owns 78% of the joint venture, with the remainder held by Pfizer Inc and Shionogi & Co.
Glaxo posted a pretax profit of GBP2.97 billion for the three months to end-December, compared with GBP6.65 billion in 2013, as revenue fell to GBP23.01 billion from GBP26.51 billion. For its fourth quarter it posted a pretax profit of GBP531 million, down from GBP2.55 billion in the previous year.
Glaxo posted restructuring charges of GBP750 million compared to GBP517 million a year before, and legal charges of GBP548 million compared to GBP252 million, including the GBP301 million fine it paid to the Chinese Government over bribery investigations.
Growth of 5% in emerging markets for pharmaceuticals and vaccines sales were offset by flat sales in Europe and a 10% decline in US sales, the latter hit by "greater than anticipated" weakness for Advair. Sales of Advair were down 25% in the US for the full year, including a 27% fall in the fourth quarter. Total revenue from Advair in 2014 was GBP4.23 billion, down from GBP5.27 billion a year before.
ViiV Healthcare reported 15% sales growth in 2014, boosted by the launch of HIV treatments Tivicay and Triumeq.
Although Glaxo's consumer healthcare business reported a 1% drop in revenue for the full year due to supply interruptions, revenue was up 2% in the company's fourth quarter, as strong growth from its rest of the world markets offset flat sales in Europe and a decline in the US.
Glaxo said that it is starting to see some "early indications of how increased coverage and our new portfolio" will help it regain market share and improve its performance in its respiratory business. It launched two new respiratory treatments in the US last week, and is awaiting US Food and Drug Administration decisions for two further drugs. It continues to expect total sales of its respiratory portfolio to return to growth in 2016.
The company is planning to hold a research and development day in October to reveal more about its early pipeline.
It posted core earnings per share of 95.4 pence at constant currency, compared with 112.2 pence in 2013, even though it had a lower effective core tax rate of 19.6% compared with 23.0% in 2013. It had previously guided that its 2014 core earnings per share would be broadly similar to 2013 at constant currencies. The core earnings number was slightly above analysts' consensus expectations, according to data from Morningstar which showed the consensus estimate for its core earnings per share at 94.52p.
The company said that it has produced GBP400 million in yearly cost savings in 2014 through its ongoing restructuring programmes. The company is restructuring its commercial operations in a programme expected to cost GBP1.5 billion, with the aim of achieving GBP1 billion of yearly cost savings over the next three years.
Glaxo expects the headwinds it faced in 2014 to continue into the first half of 2015, although it expects a stronger performance during the second half. It expects Advair sales to continue to decline in 2015 given the sustained price pressure in the US and Europe, and generic competition in Europe.
Berenberg reiterated its Hold rating on the stock, saying Glaxo's results are a "better end to a difficult year." Glaxo's core earnings per share beat Berenberg's forecast by 9%, and the broker said it was pleasing that respiratory sales did not disappoint compared to forecasts.
"A solid end to 2014 and the company has laid out a pathway for notable events in 2015," Berenberg says. "If the respiratory franchise can stabilise this year, the 2016+ horizon should see a return to growth."
Shares in the company are trading up 1.8% at 1,479.50 pence Wednesday afternoon, making it the best-performing stock in the FTSE 100 on the day.
By Hana Stewart-Smith; hanassmith@alliancenews.com; @HanaSSAllNews
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