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GlaxoSmithKline

Published on 24/02/11 at 10:26am

The biggest UK-domiciled pharmaceutical company, GlaxoSmithKline has managed to maintain its industry-leading status in recent years despite relatively few new products.

Andrew Witty has been the company's chief executive since 2007, and has eschewed 'mega mergers' in favour of more external deal making and alliances. One of the most notable examples of this new approach is the creation of ViiV, a new joint venture with Pfizer which merges the companies' HIV portfolios and businesses.

Profits in 2010 were hit by problems relating to its diabetes drug Avandia, which was withdrawn in September in the EU and its use severely restricted in the US after regulators reviewed further cardiovascular risk data.

Profits after tax plummeted 56% to £3 billion for 2010 following a number of large legal charges, including a £2.2 billion hit relating to Avandia.

“There is no doubt that the scale of legal provisioning that has been required is significant,” said GSK’s chief executive Andrew Witty.

“However, I continue to believe that it is in the company’s best interests to resolve this inherent unpredictability and reduce our overall litigation exposure.”

Avandia was removed from the European market and restricted on the US market after long running studies suggested a link between the diabetes drug and a number of cardiac events.

Sales of the drug last year fell by nearly a half (44%), down to £440 million, though rumblings over its safety have been ongoing since 2007. Over the past four years GSK has lost over £1 billion in sales and the company expects this slide to continue throughout 2011.

Overall GSK’s turnover for 2010 dropped by 1% at constant exchange rates to £28.4 billion but fourth quarter results showed a 13% drop in revenue.

Its biggest seller, the respiratory drug Seretide/Advair, climbed 2% to £5.13 billion and its pandemic flu vaccine Pandemrix was the biggest climber, up 31% to £1.19 billion.

Generic erosion in the US and EU hit anti-viral Valtrex, down 60% to £532 million. Bone drug Boniva was also down by 69% to just £78 million, after GSK transferred rights to the drug in the US to Roche.

Geographically, GSK’s biggest growth came from emerging markets, with sales up 16% in the fourth quarter to £969 million.

Witty said that this was fundamentally reducing GSK’s dependency on sales of products in “white pills/Western markets”. 

Sales generated from these markets and products have decreased from 40% in 2007, to 25% in 2010, he said.

US sales took the biggest hit, with revenue dropping by 11% to £7.6 billion; sales declined by 6% in Europe to £6.5 billion, hit by the US healthcare reforms and price erosion respectively.

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