Look at our new launches, GSK urges, as its respiratory woes steal the limelight

trelegy
Trelegy’s launch is one of the best respiratory rollouts "in the past decade at this point postlaunch,” GSK pharma chief Luke Miels told shareholders on Wednesday. (GSK)

GlaxoSmithKline is as upbeat as ever about the key launches it has underway—including its new shingles vaccine Shingrix—but take a look at the business as a whole, and you'll find sore spots.

None so sore as the company's crucial respiratory franchise, but its HIV business isn't pain-free either, analysts pointed out Wednesday after the company released first-quarter earnings.

Pharma chief Luke Miels accentuated the positive during a call with analysts, touting, as an example, its new respiratory launch Trelegy. The rollout of that three-in-one respiratory product so far “has surpassed that of our other Ellipta launches in recent years,” he said. In fact, Trelegy’s is “one of the best respiratory launches in the past decade at this point postlaunch,” he told shareholders.

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That launch is only set to ramp up now that the FDA has expanded Trelegy’s indication to COPD patients who need long-term therapy, a group that amounts to almost 7.3 million in the U.S. That new approval means GSK can “expand our reach” beyond its initial pool of about 900,000 patients and begin marketing to a base of primary care docs, which “really is the key to the longer-term success for Trelegy,” Miels said.

But the rest of the respiratory picture isn’t quite as pretty. Despite the continued absence of an Advair generic, that longtime blockbuster took a big hit this quarter as payers prepped for cheaper options. GSK now expects Advair sales to slide by 30% in the U.S. this year, even if knockoffs don’t launch. That would put 2018 sales at about $1.57 billion, down from approximately $2.2 billion in 2017, Wells Fargo analyst David Maris wrote in a note to clients.

Miels acknowledged the problem—and in light of Advair's woes, GSK is now pulling resources from behind that drug to back Trelegy and Breo, a newer product that’s been hit by pricing pressure, Miels said.

The new pharma chief also talked up Shingrix, saying the shingles shot is “rapidly building coverage,” with access levels up to 90%. The vaccine churned out £110 million in first-quarter sales, and about one-third of those vaccine doses have been used already, Miels said: “[W]e’re confident this is going to be a very significant product for GSK.”

But respiratory wasn’t the only area “of weakness,” Bernstein’s Tim Anderson pointed out in his own note to clients. The company, whose overall sales fell in line with estimates at £7.2 billion, missed predictions for its HIV portfolio, ViiV—a lineup investors are watching closely thanks to new competition from Gilead.

“Not exactly off to a great start in 2018, despite management's claims to the contrary,” Anderson wrote.

And he wasn’t the only analyst to question GSK’s rosy characterization of the quarter. Others asked execs on the call why they hadn’t updated this year's financial forecast if all was well. Despite the Advair sales trouble, Glaxo maintained its current predictions that core EPS will stay put or decline by up to 3% if an Advair generic hits, or grow by between 4% and 7% if it doesn’t.

The way Glaxo sees it, though, there’s no reason to tweak things until it has more clarity around the copycat situation. “We’re not going to update our guidance until we can land that with a bit more precision,” CFO Simon Dingemans said on the call.

For the quarter, earnings per share checked in at 24.6 pence, just topping consensus predictions.