UK drugmaker GlaxoSmithKline has recorded its best annual results since its formation six years ago, with operating profit for the full-year 2005 up 16% (all figures at constant exchange rates) to £6.9 billion ($12 billion), and earnings per share jumping 18% to 82.6 pence.
The group’s pleasing performance indicates that it has well and truly left behind its generic troubles of 2004, in which copycat versions of some of its best sellers, such as the antidepressants Paxil (paroxetine) and Wellbutrin (bupropion), substantially ate into sales.
This time last year, the company’s chief executive, JP Garnier, claimed that 2005 would be a “year of recovery” and, speaking at a press conference in London yesterday, he confirmed: “This was a great year for GSK. All our key products performed well in 2005, and we made significant progress in our pipeline for future growth.”
Growth was driven by a particularly strong fourth quarter, which saw operating profit leap 20% to £1.6 billion and EPS rocket 33% to 19.8 pence on an 8% sales hike to £5.9 billion. But it was the strong performances by the firm’s key products that really kept the mill running, propelling total yearly revenues up 7% to £21.7 billion.
Several of GSK's drugs turned in solid revenue growth for 2005: the company’s top-selling product, Seretide/Advair (salmeterol and fluticasone) for asthma, leapt 22% to £3 billion; combined sales of Avandia (rosiglitazone) and Avandamet (rosiglitazone and metformin) for diabetes grew 18% to £1.3 billion; turnover of the vaccines franchise jumped 15% to £1.4 billion; Lamictal (lamotrigine), for epilepsy/bipolar disorder, climbed 24% to £849 million; Valtrex (valaciclovir), for herpes, was up 21% to £695 million; and Coreg (carvedilol) for heart disease, rose 32% to £573 million.
But not only is GSK booking impressive sales for its top-line products, it is also in the rather enviable position of having an R&D pipeline bursting at the seams, currently housing 146 projects in clinical development with no less than 16 currently filed or in Phase III. In fact, since 2001, GSK’s pipeline of New Chemical Entities has skyrocketed 76%, and 2006 can expect to see seven GSK products gaining the regulatory nod. “We are in good shape,” Garnier remarked, adding: “Productivity continues to increase and is clearly above average. This is very good news for the future.”
And the group has high hopes for its steadily-growing vaccines segment, with Garnier evening going as far as to say: “2005 will be the year of the vaccine for GSK.” Several recent acquisitions have added muscle to its vaccines pipeline, of which ID Biomedical is considered as particularly important, as it opens up the flu vaccine market to GSK allowing it to compete with French pharma heavyweight Sanofi-Aventis.
Last month, GSK Biologicals became the first company to file for approval of a vaccine against a pandemic strain of influenza under a European fast-track system designed to accelerate the approval process. The group plans to start trials of H5N1 pandemic vaccine in the second quarter, and large-scale production is expected before year-end.
Another major sales boost should come from the cervical cancer prevention vaccine Cervarix, “a vaccine with a great future,” according to Garnier. GSK plans to file Cervarix in Europe in March, followed by a submission to US regulatory authorities by the end of the year. If it obtains the seal of approval, the vaccine will compete against Merck & Co’s Gardasil, which has been granted a six-month priority review in the USA.
In terms of acquisitions for future growth, especially in light of speculation that US drug behemoth Pfizer will put its lucrative over-the-counter medicines unit up for sale later this year, Garnier would not be drawn into any specifics, saying only that the group will “see if there's anything interesting at a reasonable price where we can accelerate our growth and benefit the shareholders in a very visible fashion,” he told journalists at the results conference.
Similarly, he refused to comment on growing rumours that GSK has made an offer for Swiss biotechnology group Serono, which went up for sale late last year. Any purchase of Serono, which makes the multiple sclerosis treatment Rebif (interferon beta-1a) would have an estimated value of around $13 billion, and could be a tempting move to many of its larger peers, which would gain several biotechnology drugs as well as production muscle from the buy.
So the future looks bright for GSK, in the near-term at least. "Looking into 2006, the strong growth seen from key products such as Seretide/Advair, Avandia and from our vaccines business is set to continue, and we expect further good news on GSK's late-stage pipeline,” Garnier said, which should help GSK attain its 2006 EPS growth conservative growth target of 10%.
The group’s London Stock Exchange shares closed up 13 pence £14.57 yesterday after a bout of heavy trading, while those exchanging hands on the New York Stock Exchange rose $0.64 to $50.95.