GSK fighting emerging market, China sales slump, sees near-term rebound

GlaxoSmithKline ($GSK) struggled in China and emerging markets in the third quarter, though executives said that plans afoot would see it recover by the first quarter of next year as volumes pick up.

Simon Dingemans, chief financial officer, said on the Oct. 29 earnings call that emerging markets sales were hit by competition, with CEO Andrew Witty adding that moves to redraw the way the company does business also impacted sales.

"In International, sales declined 4% pro forma," Dingemans said. "The region's growth continues to be held back by disruption in the Middle East and our China business, which saw a 27% pro-forma decline in the quarter. As we continue to reset this business for the future, including disposing of a number of peripheral parts to the portfolio."

"In emerging markets, sales were down 8% pro forma, particularly impacted by established products down 17%, again mainly driven by China. And Respiratory sales down 6%," Dingemans said, with Witty later noting the pressure points.

"A few things going on: you have some extra generic pressure in a few countries, you have some macroeconomic pressure, particularly in places like Brazil and Russia which I think is common to many, many people," Witty said, adding that a turnaround is in sight.

GSK CFO Simon Dingemans

"I would expect us to probably be in growth in Q4 for the EMs (emerging markets) and I would definitely expect us to be in pretty robust growth, market level growth rates for 2016," he said. "So I think this is a reasonably temporary phenomena and I think we will start to see that move around."

Dingemans did note that Japan sales rose 4% pro forma led by strong performance in Respiratory which was up 9%.

GSK does appear to be recovering in some respects in China following a massive $489 million fine in 2014 after the pharma giant was accused in 2013 of bribing doctors to favor its treatments.

In October, the company used the visit of President Xi Jinping to Britain to sign deals in areas like oncology and imaging, and Witty also joined the recently formed, 30-member panel of the China-Britain Business Council.

"We've made it clear to the doctors in China about our changes and have spent a great deal of time to explain to them the reasons for us making the changes," Witty told the China Daily in October.

- here's the release (PDF)

Read more on