GlaxoSmithKline has posted a solid set of financials, unveiled plans to restructure its European operations and said it is considering the sale of its Ribena and Lucozade drinks.
First to the figures and fourth-quarter turnover fell 3% to £6.80 billion, while core operating profit inched up 1% to £2.92 billion. Pharmaceutical and vaccines sales were flat at £5.55 billion, hit principally by pricing pressures in Europe. In terms of products, Advair/Seretide (salmeterol and fluticasone) for asthma and chronic obstructive pulmonary disease, was again GSK's top-seller, with revenues inching up 1% to £1.30 billion.
The Avodart (dutasteride) franchise, for the treatment of benign prostatic hyperplasia, increased 4% to £208 million, while Lamictal (lamotrigine) for seizures and bipolar disorder, grew 18% to £164 million. Heart drug Lovaza (omega-3-acid ethyl esters) slipped 6% to £148 million, while the asthma inhaler Ventolin (albuterol) brought in £177 million (+5%).
As for new products, Benlysta (belimumab) for lupus had sales of just £29 million. Promacta/Revolade (eltrombopag) for immune thrombocytopenia contributed £38 million, up 67%, while the sarcoma drug Votrient (pazopanib) reached £62 million. Vaccine sales were up 10% to £864 million, while consumer healthcare revenues were flat at £1.25 billion.
Chief executive Sir Andrew Witty (pictured) noted that "it's obviously a very difficult period for European countries", adding that "we have to take almost one quarter at a time, to really get a sense of where this price dynamic is going to go". In the meantime, however, he noted that "we've undertaken a substantial review of our European businesses operations, both in the size of those operations to reduce costs…but, more importantly probably, to redeploy resources".
Shake-up for manufacturing and R&D
Sir Andrew said that "even within Europe there's still areas of growth, while there are some areas of pressure, so we want to make sure we've realigned accordingly". He also announced a shake-up of manufacturing and R&D, saying "we've been doing a lot of work over the last several years in terms of new ways of working…applying new technologies which we've been developing into how we might make our medicines more efficiently, at lower cost and actually with a lower carbon footprint".
As for consumer, Sir Andrew said "I think it's a terrific business", noting that in 2012, the toothpaste Sensodyne "became our first billion dollar blockbuster consumer product". However, the latter and other products are "science-endorsed" unlike Lucozade and Ribena, which are only big in western markets and "are not generally expert endorsed in the way that those others are". Therefore GSK is carrying out a strategic review as to whether the two drinks franchises should stay in-house or sell them.
Sir Andrew concluded by noting that GSK filed six drugs in the last 12 months, and they "only represent the first wave of what we think is coming from R&D". Over the next two years, "we think in fact we have the chance to launch up to 15 new drugs and vaccines".
Commenting on the results, Ana Nicholls, healthcare analyst at The Economist Intelligence Unit, described them as "faintly disappointing", but said GSK's 'change programme' across R&D, manufacturing and particularly its European operations, should result in annual cost savings of £1 billion by 2016.
In terms of pipeline, she noted that "Unlike some of its rivals, GSK is now well over the patent cliff, so the hit to revenues in future should be limited". The company is also well-diversified geographically, having invested heavily in countries like China, South Africa and India (this week GSK paid nearly $900 million to increase its stake in its publicly-listed Indian consumer healthcare subsidiary to 72.5% from 43.2%).
Mick Cooper, analyst at Edison Investment Research, said that flat sales over the last year "highlight the importance to GSK of the potential new product launches in 2013, as it looks to return to growth". He added that "the latest restructuring announcements is indicative of the changing market environment, especially in Europe, where reimbursement and pricing is an increasing issue".