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‘Challenging’ Europe slows GSK

Published on 08/02/13 at 11:26am
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‘Challenging’ economic conditions in Europe are among the factors GlaxoSmithKline is blaming for its sluggish performance, with turnover worldwide down 3% from 2011 to £26.4 billion last year.

Pharma accounted for £17.9 billion of this, a year-on-year drop of 2%, with ‘weaker than expected’ sales in Europe - and the US business also flat - down 7% and 4% respectively.

The manufacturer said pressure from austerity measures in Europe, including price cuts, parallel trade and generic substitution, was hampering performance.

Negative pricing knocked six percentage points off growth, GSK claims, and has led the company to take action.

“Given the sustained shift we have witnessed in the European reimbursement and pricing environment, we plan to initiate further restructuring of our European pharmaceuticals business,” warned chief executive Sir Andrew Witty.

This would reduce costs, improve efficiency and “reallocate resources to support identified growth opportunities”, he said, in a bid to produce annual cost savings of at least £1 billion by 2016.

The new restructure will cost £1.5 billion and comprises, GSK says, “technological advances and opportunities to eliminate complexities”, simplifying the supply chain, shortening cycle times and lowering inventory levels.

No mention was made of job cuts, which have been a key part of the firm’s previous restructuring programme, in which GSK has been looking in particular at reducing fixed costs such as bricks and mortar and abandoning research areas it feels are less likely to bear fruit.

Witty went on: “As we reduce our European cost base, we are also evaluating further strategic options to ensure we develop new capabilities and are able to maximise the value of our current and future portfolio in this region.”

He expects progress on this will be made during 2013. 

On the rest of 2012’s financial results, GSK’s vaccines turnover worldwide was also down 2% after sales of Cervarix in Japan fell (2012: £132 million; 2011: £344 million) following the end of the 2011 HPV vaccination catch-up programme.

But the company pointed to success in R&D, with six drugs filed from the start of 2012 including Relvar/Breo in asthma and COPD) and Anoro (a LAMA/LABA for COPD).

GSK says its pipeline is robust, with Phase III data expected on nine new drugs and vaccines this year and next.

Over the next three years, GSK has the potential to launch around 15 new products globally, it said.

Sales of pharma and consumer healthcare grew 10% year-on-year and now account for more than a quarter of GSK’s business.

Adam Hill

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