Source: GlaxoSmithKline

Shares of British biopharma GlaxoSmithKline (NYSE:GSK) are up today after the company posted its third-quarter earnings report. Even so, the company reported slightly disappointing sales of $9.42 billion, which missed consensus estimates by 1.7%, and marks a 10% decline from a year ago. Diluted earnings per share came in at $0.137 for the quarter, which can't be directly compared to consensus because certain items were excluded. 

Here's a deeper at Glaxo's mixed bag of a third quarter. 

Respiratory drug revenue continues to drop
Glaxo's pivotal respiratory drug portfolio, headlined by its lung drug Advair, saw revenue drop another 8% in the third quarter, compared to a year ago. Management said the main culprit in the unit's underwhelming performance was pricing and volume issues for Advair that helped to drive sales down by 24% in the U.S.

Nevertheless, a deeper look shows that weak sales of newer respiratory drugs like Anoro and Breo Ellipta played a role as well. Specifically, Breo's global sales only hit $25 million in the third quarter, putting it way behind schedule in terms of replacing declining Advair revenue. As a refresher, Express Scripts decided not to include Breo in its list of medicines eligible for reimbursement earlier this year, meaning that most private payers won't cover the drug. Per today's earnings report, this lack of broad-based coverage appears to be hurting sales in a big way.   

Even more changes coming for the pharma giant
Because of the slow uptake of newer respiratory drugs Anoro and Breo, and a nearly half-billion-dollar fine in China during the quarter due to its bribery scandal, Glaxo is exploring cost-saving measures through a workforce reduction. Keeping with this theme, the company said that the swap of its oncology unit for Novartis(NYSE:NVS) vaccine unit should also help to save the company about $1.6 billion within three years, presumably due to lower R&D expenses. 

As a way to raise additional capital and unlock shareholder value, Glaxo said it's also open to the possibility of an IPO for its minority stake in the fast-growing HIV business ViiV health care, co-owned with Pfizer (NYSE:PFE) and Shionogi & Co. According to CEO Andrew Witty's comments during the conference call, an IPO won't take place until at least 2016, and it's unclear how much of their stake in ViiV they would consider giving up at this time.  

Revenue and dividend outlook remain steady
In today's release, management stressed that its full-year outlook remains unchanged, and that it doesn't plan a dividend reduction in 2015. Although the dividend won't be increased next year, the company is planning on returning up to $6.4 billion to shareholders via a special B-share transaction, with more details on this special share scheme to come sometime down the road.

Glaxo needs to find a way to generate top-line growth
Like most of its Big Pharma brethren, Glaxo is a company in the midst of a radical transformation due to the ongoing patent cliff. But unlike some of its peers, Glaxo hasn't had much success in bridging the gap with its clinical pipeline, evinced by the weaker than expected performance of its next generation respiratory drugs, as well as the the failure of multiple high profile oncology candidates such as its lung cancer vaccine MAGE-A3.

Viewed in this light, I wouldn't be surprised to see this once mighty pharma go shopping for a high-impact acquisition sooner rather than later. After all, it can't continue to buoy the bottom line forever by cutting jobs and selling some of its best assets, like ViiV healthcare.