The 2015 financial year is one of change for drugs giant GlaxoSmithKline (GSK). Sales are up, but core operating profits are down and EPS is expected to decline "at a high teen percentage rate" before returning to growth next year. That reflects dilution from last year's high-profile asset swap with Swiss rival Novartis and ongoing pricing pressure as several cheaper generic copies of GSK products flood the market. Analysts at Deutsche Bank have trimmed their earnings forecasts again, and now expect EPS of 73.8p this year, compared with 94.2p in 2014.
Understanding how GSK grew interim sales by 4 per cent to £11.5bn comes down to the timing of the Novartis deal. The transaction completed on 2 March 2015, and so GSK's results include four months of turnover from the former Novartis vaccine and consumer healthcare divisions. The boost is clear: on a pro-forma basis vaccine sales fell 1 per cent in the first half, but including Novartis they rose 11 per cent. Similarly, consumer healthcare sales rose 7 per cent pro-forma but a whopping 37 per cent including the former Novartis products.