GSK’s new vax unit defies slow growth concerns with sales, profit gains

More than a year after completing its Novartis ($NVS) asset swap, GlaxoSmithKline ($GSK) is reaping the rewards in its vaccines group. In first-quarter results reported today, GSK said that vaccines sales grew to £882 million ($1.28 billion), a 23% jump on a reported basis or 14% on a pro forma basis.  

To achieve the gains, the unit enjoyed standout performances from several vaccines new and old. Former Novartis vaccines Menveo and Bexsero pitched in £42 million ($61 million) and £62 million ($90 million) respectively on a reported basis, while Fluarix and FluLaval saw sales gains of more than 100%. Synflorix sales grew 48% and Boostrix sales grew 29%.

For the quarter, the vaccines unit accounted for £253 million ($369 million) in profits--a 56% leap from last year’s Q1--on a core operating margin of 28.7%, a 5.7 percentage point leap from the same period last year.

After initially seeing its vaccines margin and profit take a dive following the multibillion-dollar asset swap, GSK reports that its Q1 margin gains were driven by a “favourable product mix and enhanced operating leverage in the quarter from the phasing benefits to U.S. and International sales together.” To add to that, the unit benefitted from its restructuring and integration efforts in R&D.

GlaxoSmithKline, in sending away its oncology assets and receiving Novartis' vaccines portfolio, will continue to lean on vaccines for growth in the coming years as patent losses and other factors eat away at pharma sales. Last month, the London-based pharma announced that its longtime CEO Andrew Witty--who orchestrated the deal--will leave the company next March to clear the way for a new leader.

GSK isn’t alone in making a push into vaccines. An EvaluatePharma report last year said that the top four players by 2020--a group that includes Merck ($MRK), Pfizer ($PFE) and Sanofi ($SNY) as well--will be within one percentage point of market share that year. The analysts predicted GSK would be the third largest vaccine player by 2020 with sales that year of $7.34 billion.

- here's GSK's release

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