Things are changing at GlaxoSmithKline ($GSK), but not fast enough to avoid the 18% plunge in first-quarter profits the company reported Monday. But with big moves underway--including the introduction of new respiratory products, a giant asset swap and consumer venture with Novartis ($NVS) and a marketing clean-up in China--CEO Andrew Witty doesn't expect the skid to last long.
|Glaxo CEO Sir Andrew Witty|
Earnings for the British drugmaker sank to £1.53 billion ($2.58 billion) to match analyst expectations, down from £1.9 billion last year. But revenue--traditionally powered by respiratory behemoth Advair, which generated nearly 20% in 2013--missed Wall Street's £5.82 billion mark as the off-patent blockbuster ceded market share, dropping 10% to check in at £5.61 billion.
"This quarter has amply demonstrated the very significant changes that are underway in GSK's portfolio," Witty said in a statement.
One of those changes is the passing of Glaxo's respiratory torch as Advair's dominance wanes. After bringing in $8.25 billion in 2013 sales, the aging drug lost a step in Q1, registering top-line numbers 15% lower than the year-ago quarter at £1.04 billion. That performance, in turn, pulled U.S. pharmaceutical and vaccines sales down 10%. Witty chalked the loss up to increased competition to Advair and a reduction in market share as rivals, like AstraZeneca's ($AZN) Symbicort, made gains.
But Glaxo is prepping a host of new respiratory meds to step in. As of Monday, wannabe COPD blockbuster Anoro is available on pharmacy shelves, and the company is awaiting the FDA's decision on another COPD treatment, Incruse. Five other respiratory meds are in late-stage development, and Breo--another blockbuster hopeful--launched late last year.
On that note, however, Glaxo's next generation of respiratory stars isn't off to the start it hoped. Uptake of Breo has "been slower than anticipated" thanks to delays in payer coverage, Witty noted. The new product--along with Advair--was notably excluded from PBM Express Scripts' ($ESRX) 2014 national formulary, and Breo was absent from CVS Caremark's ($CVS) as well. But that should be changing soon following successful contract negotiations, Witty said, and the company expects Medicare Part D coverage for Breo to exceed 70% starting in early May.
Respiratory is hardly GSK's only area awaiting a revamp; last week, it agreed to sell its cancer drugs business to Novartis for as much as $16 billion in exchange for the bulk of the Swiss pharma's vaccines unit. The two companies have also joined up to create a new joint venture in consumer health, which Glaxo will head up.
Those deals won't close until 2015, however, and in the meantime, Glaxo still has work to do in China and elsewhere, where it's under fire for alleged bribery. Ongoing investigations in China cost Glaxo's emerging markets growth 2% in pharma and vaccines, with Chinese growth plummeting 20% to £137 million.
But the company is working to clean up its act; since the China scandal broke, it's introduced marketing reforms that will cut out doctor-speaking fees and other controversial incentives. And as it just recently announced, it's bringing in two new sales and marketing managers to get things there under control.
- read the release (PDF)
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