GlaxoSmithKline Q2 profits decline 23 percent

Falling sales in China and the US, as well as a strong pound contributed to a GlaxoSmithKline Q2 profits decline of 23% to £986 million ($1.678 billion) compared to £1.29 billion ($2.2 billion) in Q2 2013. The company says its Respiratory division is still “in transition”. Consumer healthcare has problems that will affect sales for the rest of the year, while a new HIV medication shows promise.

In China, where GSK has been under investigation for bribery since the middle of last year, sales nearly halved to £129 million in Q2 2014 compared to £212 million in Q2 2013.

US vaccine and medication sales declined by 10% during the second quarter, mainly because of generic drug competition.

Elsewhere in the world:

  • Business in the emerging markets increased by 11%,
  • sales in Europe were flat,
  • business in Japan declined by 7% during the quarter “due to destocking following the consumption tax increase,” but were 5% higher than one year ago.

Consumer healthcare to be ‘flat’ this year

Supply-chain problems led to a 4% fall in GSK’s consumer healthcare business, which includes such brands as Aquafresh, Macleans, ENO, Panadol, Sensodyne and Nicorette. Supplies of the nicotine-replacement therapy have been particularly hit.

GSK says the supply position is starting to improve, but will continue to affect the performance for the rest of 2014. “Overall, we expect Consumer Healthcare sales to be broadly flat for 2014,” the company wrote.

The company’s previous forecast of a 4% to 8% increase in earnings has been downgraded to “broadly similar to 2013.” The planned £1 billion to £2 billion ($1.7 billion to $3.4 billion) share buyback has been cancelled.

Respiratory drugs ‘in transition’

GSK posted an 18% decline in respiratory drugs sales, its largest category.

In the United States, Advair (fluticasone/salmeterol), the company’s best-selling medication, has been removed from the recommended prescribing list of Express Scripts, a pharmacy-benefit manager, which is asking doctors to prescribe cheaper inhalers made by rival companies.

In Q2 2014, Advair sales plunged 19% in the United States. The company warned that pressure on the medication’s market share and price is likely to continue.

Anoro and Breo slow to take off – two new respiratory medications, Anoro Ellipta (umeclidinium and vilanterol inhalation powder) and Breo Ellipta (fluticasone furoate and vilanterol inhalation powder), for the treatment of lung disease including emphysema, which GSK hopes will become blockbuster successors of Advair, have only achieved sales of about £5 million each during the quarter.

Sir Andrew Witty, GSK’s CEO, said:

“Our good progress in newly launched products is being offset by pricing and contracting pressure in the US. As we highlighted last quarter, this has resulted in a “step change” reduction in Advair market share and pricing and it is now clear that these pressures are likely to continue.”

“Our strategy to transition and diversify our respiratory portfolio is underway. While sales of Advair will continue to reduce, we expect new products, such as Breo, Anoro and Incruse, together with anticipated pipeline products, to generate new sales growth. We are already seeing some recovery in our overall volume share as new product launches progress, albeit at lower price points given the scale of price competition in the market.”

Encouraging news from new HIV drug

Newly-launched HIV drug – Tivicay (dolutegravir) – is likely to become one of GSK’s most successful launches. The drug currently has 11% market share of the treatment-naïve patient population (patients who have never been treated).

Tivicay’s “new to brand” prescription trend is well above those seen for recent competitor launches, the London-based pharmaceutical giant informed.

An FDA decision is expected for Triumeq (dolutegravir/abacavir/lamivudine), an HIV combination treatment, by the end of this year.

Video – GSK Q2 2014 results