GlaxoSmithKline took a massive hit from one-time legal and restructuring charges during the second quarter of 2010, leaving its books well in the red compared to the healthy profit booked a year ago.

The world’s second-largest drugmaker warned last week that legal settlements, primarily relating to the antidepressant Paxil (paroxetine) and the diabetes drug Avandia (rosiglitazone), would alone swipe £1.57 billion off its second-quarter results. And this, coupled with a £590 million restructuring charge, secured a loss of £304 million for the period, a far cry from the profit of £1.43 billion GSK booked for Q2 2009.

The group’s swing into the red masked an OK growth in sales for the period given the current tough economic conditions, with revenue up 4% at £7 billion, though down 2% if pandemic products are taken out of the equation.

Pharmaceutical sales accounted for £5.8 billion of the total staying level with the year-ago quarter, with an acceleration of generic competition to herpes therapy Valtrex (valaciclovir), turover of which plummeted 59% to £165 million, a temporary suspension of its rotavirus vaccine Rotarix, and lower sales of Avandia (-26% to £152 million) particularly holding back growth during the period.

On the respiratory side, sales of COPD/asthma therapy Seretide/Advair (salmeterol and fluticasone) remained level at £1.3 billion, after a 3% dip (to £655 million) in the US (because of wholesaler stocking patters) was countered by a 12% rise in emerging markets (+12% to £86 million) and Japan (+23% to £62 million). But others in the segment fared better, with hay fever spray Avamys/Veramyst (fluticasone furoate) up 19% to £57 million and the asthma inhaler Ventolin (albuterol) up 16% to £134 million.

Total vaccine sales jumped 17% to £939 million, bolstered by £275 million brought in by the group’s pandemic H1N1 jab. On the down side, a decision by US regulators to temporarily suspend marketing of Rotarix took a huge chunk out of the product’s revenues, which slid 49% to £39 million. Hepatitis vaccine sales slipped 16% to £170 million, but the pneumococcal vaccine Synflorix continued to perform well, turning in £38 million for the quarter.

Elsewhere, strong performances were also recorded for: the heart disease drug Lovaza (omega-3-acid ethyl esters), +29% to £138 million; the breast cancer therapy Tykerb (lapatinib), +32% to £56 million; the bloodthinner Arixtra (fondaparinux), +28% to £79 million; and Avodart (dutasteride), for benign prostatic hyperplasia, +14% to £157 million, while new cancer drugs on the block Arzerra (ofatumumab) and Votrient (pazopanib) made sales of £8 million during the period.

Regionally, US sales for the business were flat compared to a year ago at £263 million, as strong growth in oral care products was dragged down by dwindling sales of what the company classes “non-essential OTC medicines”, because of economic pressures. In Europe, sales actually dropped 2% to £493 million, so it was really performances in the Rest of World markets – including the strategically vital emerging regions – that led growth, climbing +11% to £496 million.

Positive outlook
Going forward, GSK’s chief executive Andrew Witty said the company is confident that its competitiveness in the US market will improve, but he acknowledged that, certainly in the short term, the underlying business performance across the Atlantic “will be somewhat masked by the continued impact of genericisation of Valtrex sales and reductions in pricing resulting from healthcare reform”.

The company has been undergoing an operational revamp for a couple of years now, and, in order to drive the business forward and secure global success, remains heavily focused on “reducing infrastructure costs and reallocating capital directly to pipeline asset projects and areas such as biopharmaceuticals and vaccines which offer potentially higher and sustained returns”, Witty said.

Under this strategy, the firm also announced that it has cherry-picked five new candidates for Phase III development, including two experimental oncology drugs targeting melanoma, as well as potential new assets for HIV and for Duchenne Muscular Dystrophy, and a vaccine for shingles prevention.