With steady Q4 earnings in hand, Glaxo chief requests 3 years for more consumer unit profits
- GlaxoSmithKline on Wednesday reported Q4 2015 earnings which weren't exactly stellar, but did match up with analysts' expectations for the firm.
- The company had core sales of £23.9 billion, a 4% increase, while EPS fell 21% year-over-year. GSK has been taking major hits in its once-leading respiratory drugs portfolio. But the latest earnings report included just a 3% decline in respiratory sales, suggesting that the bleeding has been staunched with the addition of several new products.
- During an investor call, Glaxo CEO Andrew Witty expressed confidence in his ambitions for double-digit earnings growth in 2016 and requested shareholders' patience in bolstering profits in the company's struggling consumer health division.
"In 2015, we made substantial progress to accelerate new product sales growth, integrate new businesses in Vaccines and Consumer Healthcare and restructure our Global Pharmaceuticals business," said Witty in his statement. "This progress means the Group is well positioned to return to core earnings growth in 2016."
Glaxo's recent woes have led influential investors such as the UK's Neil Woodford to call for a major breakup of the firm in a four-way split that separates divisions such as the HIV unit, vaccines arm, consumer health branch, and dermatology.
Witty has addressed these suggestions publicly, specifically the proposition of spinning off the consumer health arm. "[The consumer unit is] a very substantial business," Witty told Bloomberg from Davos, Switzerland earlier this month. "At some moment, that thing is going to be big enough to be conceptually thought about on its own. Whether or not we ever do that, there are 100 different permutations, but for the first time that could be conceptually possible."
During Wednesday's earnings call, Witty requested more time to boost profitability in the unit. "We’re only one year into the extraction of value from the creation of this consumer company," he said. "We’ve laid out very clearly that we think it’s a three-year journey to really get the margin structure to where we want it to be."
The Glaxo consumer unit has considerably lower margins (around 11.5%) compared with GSK's prescription drugs (28.2%) and vaccines (17%) divisions.