GlaxoSmithKline (GSK) has hinted at additional asset disposals and restructuring as it reported drops in both sales and earnings in the fourth quarter.
2014 was always going to be a tough year for the company – with competition and pricing pressure affecting its respiratory blockbuster Advair (salmeterol and fluticasone) in the US and a costly bribery scandal in China taking their toll.
It was therefore no surprise that revenues at the group fell 10% to £6.18bn ($9.4bn) in the fourth quarter, while operating profit plunged 72% to £691m, although the results were actually a little better than expectations.
Chief executive Sir Andrew Witty said GSK is considering a spin-out with its HIV joint venture with Pfizer and Shionogi – ViiV Healthcare – and is also open to other deals that might streamline the group. GSK owns 80% of ViiV and the joint venture is performing strongly at the moment, with 2015 sales predicted to reach £2.5bn thanks to the contribution of new products such as Tivicay (dolutegravir).
Analysts have suggested the ViiV spin-off could raise up to £17bn, but suggest the transaction could take a year or more to complete, should it go ahead. GSK has reportedly retained advisors to help it explore options for the business.
GSK is already in the midst of a major shake-up with an asset-swapping deal with its cancer portfolio going to Novartis in return for the latter’s vaccines business, as well as the creation of a joint venture between the two firms in consumer health and a £1bn cost-cutting drive announced in its third-quarter results.
A spin-out for ViiV or other asset disposals would “give management a marked degree of financial flexibility,” according to analyst Ketan Patel of Ecclesiastical Investment Management.
The key for the company in 2015 will be to “deliver on the cost-cutting programme, the pipeline and stabilising the revenues in respiratory,” he said.
Witty told analysts yesterday that “the most important thing for us to get right in the short run is our respiratory business,” adding that recent product approvals such as Breo (fluticasone and vilanterol) and Anoro (umeclidinium and vilanterol) have got off to an encouraging early start and will be key to getting the unit back on track.
Respiratory will still be under pressure in 2015 with Advair expected to slide another 20% in the US, but the unit should return to growth next year, he said.