GlaxoSmithKline has posted a disappointing set of financials for the first quarter, as generic competition and one-time charges hit earnings hard.
The company reported a 31% decline in operating profit, before “major restructuring”, to £1.98 billion, while group turnover was down 5% to £6.77 billion. Pharmaceutical sales fell 6% to £5.62 billion, with drug sales in the USA sinking 22% to around £2.3 billion.
Generic competition across the Atlantic tore into sales of Lamictal (lamotrigine), which fell 61% to £144 million, while the antidepressant Wellbutrin (bupropion) slumped 66% to £52 million. Sales of Imigran/Imitrex (sumatriptan) fell 68% to £64 million, while ReQuip (ropinirole), for Parkinson’s disease and restless legs syndrome, fell 56% to £50 million.
The diabetes drug Avandia (rosiglitazone) brought in £197 million, down 19%, while revenues from GSK’s HIV franchise fell 8% to £419 million. On a more positive front, sales of Advair/Seretide (salmeterol and fluticasone) for asthma and chronic obstructive pulmonary disease were flat at £1.21 million, while vaccine sales climbed 18% to £625 million.
Commenting on the results, chief executive Andrew Witty noted that while GSK is doing well in the Europe, Asia and in the emerging markets, “in the USA, we are experiencing some of our toughest performance challenges”. However he said “our US business is a vital part of GSK’s future and we are aggressively re-engineering our US operations to make sure we have the right resource in the right areas and an overall lower level of infrastructure costs”.
Mr Witty also said that he is confident that, in the short-term, “with generic exposure reducing significantly and several new product launches to come”, we can expect a significant improvement to the performance of this business during the second half of 2009.
In terms of late-stage pipeline, “we are continuing to maintain a level of around 30 assets”, he said, noting that while diabetes treatment Syncria and the MAGE-A3 cancer immunotherapeutic for melanoma have moved into late-stage trials, “disappointing Phase III results for elesclomol and rosiglitazone XR in Alzheimer’s disease are evidence that R&D remains challenging”.
Mr Witty concluded by saying that the first quarter was indicative “of what we always expected to be a year of two halves for GSK”. The first six months will be heavily impacted by the year-on-year comparative effect of generic entries in the USA. but in the second half of 2009, “this impact is projected to reduce and we expect to see increased sales contributions from new products”.
The response from analysts was less than enthusiastic. Tim Anderson at Sanford Bernstein issued a research note saying that while GSK “may not face as much generic exposure as many of its peers do through 2015, the company has yet to gain our confidence in its R&D abilities”.
