The share price of GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US) is currently down over 3% following publication of a results announcement for the second quarter and interim management report for the half-year.
The pharmaceutical giant reported that second quarter core operating profit plummeted 25% (14% on a constant exchange rate, CER, basis) on turnover that was down 13% (4% CER), to £5.6bn, with core earnings per share (EPS) falling 25% (12% CER), to 19.1p.
The company said that there had been “significant strategic progress” in the first half of 2014, with the complicated Novatis deal on track for completion in the first half of next year. It also said there had been “continued momentum” in the launch of new products in the respiratory and HIV therapeutic areas, with HIV sales up 13%, driven by what Glaxo said was “very strong uptake” of its recently launched integrase inhibitor, Tivicay.
Increased competition in the US respiratory market, together with generic competition for Lovazam, its prescription omega-3-acid ethyl ester product, were blamed for a 4% decline in pharmaceutical and vaccines sales. Declines in the US (down 10%) and Japan (down 7%) were partially offset by what was described as a “strong performance” in emerging markets, which were up 11%, whilst European sales remained flat.
Turnover in Glaxo’s consumer healthcare business was down 4%, attributed to previously highlighted interruptions to supply in both US and Europe. Whilst the supply situation is now beginning to improve, the company says that sales in consumer healthcare sales for the full year are expected to be broadly flat.
The company said that its pipeline opportunity “remains substantial” with over 40 new molecular entities (ie, candidate products) now in late stage development, with 30 R&D assets having the potential to be “first class” in therapeutic areas such as respiratory, immuno-inflammation, epigenetics and cardiovascular.
Looking ahead, Glaxo stated that share repurchases over the rest of 2014 likely to be “immaterial” (because of the impact of the recent sustained strength of Sterling on free cash flow), and that its full-year core EPS for 2014 is now expected to be broadly similar to 2013 (CER, and on an ex-divestment basis).
At 1,511.4p, Glaxo’s share price is down 6% so far this year, versus a FTSE 100 that’s risen 0.85%. And Glaxo trails the index significantly over then longer term, too, with a share price rise of just 36%, compared with a gain of 55% by the FTSE 100.
