Glaxo SmithKline Posts Mixed Earnings, Sparks Concern Over Merger's Effectiveness

Strategic Insights -

The merger of Glaxo Wellcome P.L.C. and SmithKline Beecham P.L.C. created the world's largest pharmaceutical company, Glaxo SmithKline P.L.C. However, the latest earnings report has raised concerns about the success of the merger. Glaxo's earnings rose just 3.8 percent on a 6 percent increase in sales, while SmithKline reported a 13 percent rise in earnings on a 10 percent increase in sales. The companies' shares have fallen since the merger announcement, with SmithKline shares dropping 3 percent and Glaxo shares falling 3.3 percent.

Key Takeaways:

  • Glaxo Wellcome P.L.C. reported a 3.8 percent increase in earnings on a 6 percent increase in sales, while SmithKline Beecham P.L.C. reported a 13 percent rise in earnings on a 10 percent increase in sales.
  • The merger was justified by Glaxo's chairman, Richard Sykes, who said that the company's relatively weak results were a "blip" and that Glaxo is a "very strong company."
  • Analysts have suggested that the merger was necessary to keep growth rates competitive with rival drugmakers, though they did not expect a significant jump in the combined growth rate.
  • Jan Leschly, chief executive of SmithKline, expressed excitement about the merger, saying that SmithKline is entering the merger as a "very strong company."
  • The combined profits of Glaxo and SmithKline for the year were $3.10 billion and $4.44 billion, respectively, on sales of $12.4 billion and $13.6 billion, respectively.

Statistics:

  • Glaxo's earnings rose 3.8 percent ($:2.77 billion to $:2.94 billion)
  • SmithKline's earnings rose 13 percent ($:1.94 billion to $:2.20 billion)
  • Glaxo's sales increased 6 percent ($:8.5 billion to $:9.1 billion)
  • SmithKline's sales increased 10 percent ($:7.75 billion to $:8.5 billion)
  • The combined profits of Glaxo and SmithKline for the year were $4.44 billion and $3.10 billion, respectively
  • The combined sales of Glaxo and SmithKline for the year were $13.6 billion and $12.4 billion, respectively

Sources:

  • "Glaxo SmithKline Posts Mixed Earnings" by an unnamed author, published in The New York Times, date not specified
  • "Glaxo, SmithKline Shares Fall on Weak Results" by an unnamed author, published in The Wall Street Journal, date not specified