GlaxoSmithKline ($GSK) says its three-part deal to sell and combine assets with Novartis ($NVS) should wrap up in the first half of next year and is now turning its attention to selling off some of its established drug portfolio, a category which took a 40% sales hit in the U.S. and 10% in the EU in Q2. It is putting products with sales of about $1.7 billion annually in the U.S. and Europe on the block and expects to have a deal in place by the end of the year.
Reports of bidding, with India's Lupin and and some U.S. companies taking an interest, were reported Tuesday by Reuters and then partially confirmed today by the British drugmaker in a tepid earnings release. Revenues in the second quarter were off 13% in real currency to £5.56 billion ($9.47 billion) but down 4% in constant exchange rates, it reported. CEO Andrew Witty said in the announcement that the primary culprit was competition in the U.S. to respiratory drugs. Hit particularly hard was its $8-billion-a-year blockbuster Advair, where sales were off 24% to £528 million ($8.99 million) in the U.S. in Q2. There was also generic competition to its fish-oil pill Lovaza. The company said sales in emerging markets were up 11%, vaccine sales were up 5% and sales of HIV meds, driven by ongoing success of Tivicay, were up 13%.
Like some of its peers, GSK is remaking itself to concentrate on some key categories and its transactions with Novartis, announced in April, are key to that process. It sold most of its oncology portfolio to the Swiss drugmaker, while buying most of Novartis' vaccine business and creating a venture to combine their consumer health operations. Total value of the transactions was about $25 billion.
But GSK is not through. Like some other Big Pharma players, it is now shopping pieces of its older drug portfolio. Abbott Laboratories ($ABT) just sold off many of its older products to Mylan ($MYL) in a $5.3 billion deal, while Merck ($MRK) and Sanofi ($SNY) are both reportedly doing some shopping of their own. Reuters says GSK's antidepressant Paxil and stomach drug Zantac are among the drugs it is looking to unload in established markets. It wants to hold on to them in emerging markets, where they generate about half of of their revenues, Reuters points out.
Lupin, which is looking to build its branded generics business in the U.S., is said to be serious, but some U.S. companies are also reported to be interested. While private equity players have reportedly shown an interest, the fact that GSK is not intending to give up the factories or sales forces associated with the products might keep them from biting, sources tell Reuters.
In a brief mention, the company acknowledged the bribery investigation in China that has bedeviled it for a year but had nothing new to add. It also said it had about 40 drugs in late-stage development and 30 in its pipeline which it expects could be among leaders in their class. The company said earnings for the year will be flat. "Looking ahead, we remain confident in GSK's medium and long-term growth prospects and in our strategy to generate sustainable sales growth," Witty said in a statement.
- here's the results announcement (PDF)
- read the Reuters story
- get more from The Telegraph