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Generics continue to erode GSK sales

Published on 06/05/15 at 04:56pm
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GlaxoSmithKline’s pharma sales continued to slide in the first quarter of 2015, but ViiV healthcare and the portfolios acquired from Novartis have seen more encouraging growth.

Although turnover for the whole group stayed steady, growing by just 1%, global pharmaceutical revenues fell by 12% to just under £3 billion – with generic competition being a major contributing factor.

Almost all of the company’s established products saw a decline in sales, as did several treatments in its troubled respiratory business. Heart drug Lovaza (omega-3-Acid Ethyl Esters) took the biggest single hit, falling 75% to £28 million following the launch of generics in April last year.

One of the biggest-selling pharma products in the world which is now off patent in Europe – Respiratory drug Seretide/Advair (fluticasone and salmeterol) – fell by 14% to £898 million. In total established products saw a 20% decline in revenues and respiratory sales were down 9 per cent.

GSK’s chief executive Sir Andrew Witty says: “Our operating environment is shifting radically, particularly in relation to pricing… We must be prepared for specific uncertainties, including the possible introduction of generic Advair in the US and the potential exercise of put options from partners in ViiV Healthcare and our consumer healthcare business.”

The region with the biggest decline in pharmaceutical sales was the US, where revenues fell by 23% to £1 billion – driven by a 22% decline in respiratory products and a 42% fall in established products. The company has been facing troubles in America for some time, and it recently cut hundreds of jobs in the country.

However the Q1 results also include one month’s turnover from the company’s vaccines portfolio and its consumer healthcare business, which were both acquired from Novartis in March as part of the companies’ asset-swap deal. Vaccines sales grew by 10% to £699 million and consumer healthcare by 24% to £1.3 billion.

“We believe the group’s new composition strengthens our ability to offer cost effective healthcare options to payers and governments and enables us to increase access for patients and consumers to our products,” notes Witty.

ViiV and boardroom shuffles

Meanwhile the company’s HIV spin-off ViiV Healthcare, which Pfizer also owns a stake in, saw strong growth of 42% to £446 million in turnover. This has led the company to announce that it would be scrapping plans to sell off ViiV, as had been previously reported.

John Lyon, a professor at Warwick business school and a former global vice president of US drug development company Covance, says that all eyes will be on new chairman Sir Philip Hampton. He is due to replace the current chairman, Christopher Gent, this week after GSK brought his start date forward in the midst of their financial woes.

“It is interesting to observe the background of Hampton, who led the board of RBS plc after the UK taxpayer bailout, and before that Sainsbury’s plc,” says Lyon. “He is not a stranger to large scale change, large challenges and restructuring boards – as evidenced through his reign at RBS.

“You could argue that Andrew Witty is doing the right thing; he has decreased dependency on producing patented medicines as when those patents run out generic versions quickly eat into their market share. Instead he has pushed GSK more into consumer products, which have lower margins but are much cheaper to produce.

“However, is that the right strategy for a blue chip medicine provider – where some argue that more needs to be invested in R&D to build a strong proprietary franchise, where one successful medicine could deliver profits for 20 years? Time will tell, but one thing is certain – change is here to stay."

George Underwood

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