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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, although it reiterated its promised GBP4 billion return to shareholders from its transaction with Novartis AG.
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.
It also said it was continuing to evaluate the possibility of an initial public offering for a minority stake in its HIV joint venture ViiV Healthcare. Chief Executive Andrew Witty told journalists Wednesday afternoon that Glaxo expects to make a decision on this by the middle of 2015, but if it were to go ahead it would not be likely to happen until 2016.
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 saw sales up 15% in 2014, boosted by the launch of treatments Tivicay and Triumeq.
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 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.
It posted core earnings per share of 95.4 pence at constant currency, compared with 112.2 pence 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 consensus, according to data from Morningstar which showed the consensus estimate for its core earnings per share at 94.52.
The pharmaceutical giant proposed a total dividend of 80 pence, up from 78 pence, and said it expects to maintain its dividend for 2015 at the same level. It also reiterated plans to return GBP4 billion of net proceeds from its transaction with Novartis to shareholders in 2015.
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.
Earlier Wednesday Sky News reported that the company has appointed banks as financial advisers on its HIV medicines joint venture ViiV Healthcare, fuelling the prospect that the company will float the division. Glaxo owns 78% of the joint venture, with the remainder held by Pfizer Inc and Shionogi & Co.
Shares in the company are trading up 2.9% at 1,494.50 pence Wednesday afternoon, the best performer in the FTSE 100.
By Hana Stewart-Smith; hanassmith@alliancenews.com; @HanaSSAllNews
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