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Image source: GlaxoSmithKline via Flickr.

As the year comes to a close, the only certainty shareholders of U.K.-based pharmaceutical giant GlaxoSmithKline (NYSE:GSK) have known this year is constant uncertainty.

It seems like there isn't a Big Pharma company that's escaped having to deal with the loss of exclusivity on key drugs this decade, and GlaxoSmithKline is no exception. The company's lead product is Advair (known as Seretide in overseas markets), an inhaled therapy designed to prevent symptoms associated with asthma and COPD. At one point Advair/Seretide was an $8 billion-plus drug in terms of annual sales.

But Advair lost its patent exclusivity years ago. The good news for GlaxoSmithKline is that the Food and Drug Administration failed to give generic drug developers a blueprint for what it would be looking for in a generic version of Advair for years, thus allowing Glaxo to profit from Advair well past its patent expiration date. However, in late 2013 the FDA did provide generic drugmakers this "blueprint," putting into motion a likely generic entrant within the next one to three years. Advair/Seretide annual sales are now on pace for less than $5 billion annually as pricing pressure takes its toll, and GlaxoSmithKline believes a grand total of $3 billion in sales could be lost by the end of the decade due to generic competition. In short, this helps explain why GlaxoSmithKline stock has shed about 4% year-to-date.

Yet behind the uncertainties surrounding Advair's steady decline are a number of positive headlines that could get GlaxoSmithKline shareholders excited about the future. Here are some of the best headlines from 2015.

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Image source: Flickr user Nguyen Hung Vu.

GlaxoSmithKline's transformation is complete
GlaxoSmithKline has undergone quite the transformation over the past couple of years as it and Novartis (NYSE:NVS) completed a three-piece asset swap in March. Novartis wound up purchasing Glaxo's fast-growing oncology business for what could amount to as much as $16 billion, Glaxo acquired Novartis' vaccine franchise (sans influenza) for around $7 billion, and the two companies wound up forming a joint-venture for their consumer health product segments.

Ultimately, the deal netted Glaxo around $9 billion in cash, but it also set both companies up for long-term success. The move allowed Glaxo and Novartis to reduce costs associated with their consumer health divisions by combining forces. It could also boost pricing power since the combination of Glaxo and Novartis would presumably command more clout.

Glaxo's expanded vaccine franchise could wind up harming margins over the near-term, as vaccines typically sport lower margins. However, a more diverse vaccine product portfolio and a higher volume of vaccine sales should make up the margin reduction in the long run. In Novartis' case it winds up further ingraining itself as a force to be reckoned with in oncology. 

A big win against shingles
Perhaps the best headline to come out of the company's vaccine franchise in 2015 was the announcement in late October that Shingrix, the company's experimental, late-stage vaccine for herpes zoster (aka shingles) demonstrated 90% efficacy against shingles in patients aged 70 and older in the ZOE-70 trial. The vaccine was also shown to have prevented chronic neuropathic pain associated with shingles in 89% of trial patients aged 70 and over, and 91% in people aged 50 and up in the ZOE-50 study. A previous study had also demonstrated a 97.2% vaccine effectiveness.

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Image source: GlaxoSmithKline.

Thus far all aspects of its clinical studies for Shingrix have met their primary endpoints. It's worth noting that grade 3 adverse events were a bit higher for patients administered Shingrix compared to the placebo, but in terms of serious adverse events the safety profile of Shingrix and the placebo were similar. Translation: there's probably not too much to worry about here from a safety perspective.

Glaxo is expected to file its marketing submissions for Shingrix in the first half of 2016, and if approved I could see this vaccine selling in excess of $1 billion annually at its peak.

Turn that frown upside down
Lastly, we'll turn to GlaxoSmithKline's third-quarter conference call, where the real headline was the announcement from the management team that it expects double-digit percentage EPS growth in 2016. This is noteworthy considering that GlaxoSmithKline has been in a multi-year revenue decline, which has been pressuring its bottom-line.

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Image source: GlaxoSmithKline.

Specifically, GlaxoSmithKline's management team believes that new products between now and the end of the decade could wind up generating approximately $9 billion in annual sales. This could include Shingrix, but it's expected to be fueled by growth in its respiratory product line. Over the past two-plus years GlaxoSmithKline and Theravance (NASDAQ:THRX), its development partner, have introduced Breo Ellipta, Anoro Ellipta, Incruse Ellipta, and Arnuity Ellipta to pharmacy shelves. These next-generation, long-lasting asthma and COPD therapies all have blockbuster potential, and both Glaxo and Theravance are counting on physician uptake and insurer coverage to fuel sales growth and counteract Advair's ongoing decline in sales.

Should you be buying GlaxoSmithKline?
Now that we've briefly looked at Glaxo's best headlines in 2015, let's tackle the toughest question of all: should investors be buying shares of GlaxoSmithKline?

Although Glaxo's management team is very bullish on its end-of-decade outlook, and the company has had little difficulty bringing its next-generation respiratory products to market, I'm not sold on GlaxoSmithKline just yet. The big concern is the higher price point associated with its new respiratory therapies relative to the current standards of care, which could make gaining insurer coverage difficult.

Additionally, Glaxo and Theravance could struggle to break through to physicians and consumers who've been loyal to the same maintenance drugs for years (i.e. Advair or Spiriva). Glaxo noted that breaking this cycle is what's caused Anoro Ellipta's launch to progress slowly. Glaxo may need to substantially up its marketing budget in order to fuel its respiratory franchise sales, but this isn't a fix that I foresee happening overnight.

GlaxoSmithKline's superior dividend yield of 5.8% is tempting, but with headwinds still to work through I believe your money would be better served in other healthcare companies in 2016.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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