GSK scrapes up 2% sales growth despite politics, generics

Europe is once again a big drag on pharma earnings. For GlaxoSmithKline ($GSK), the European ball and chain slowed drug and vaccine sales 6%. Good thing U.S. revenues took a 9% leap--and emerging markets sales grew 2%--because otherwise, GSK wouldn't have eked out its 2% sales increase overall, to £6.64 billion ($10.49 billion).

"Despite good progress on new launches in a number of therapeutic areas ... the continued implementation of government austerity measures left [European] pharmaceuticals and vaccines sales down 6%," CEO Andrew Witty said in a statement. Meanwhile, political instability in the Middle East and Africa pushed sales in that area down 6% to £267 million ($430 million), and vaccine tenders depressed sales of those products in emerging markets and Asia 9%.

Bright spots in emerging markets? Chinese growth, which reached 27%, with £163 million in sales ($263 million), and Latin American pharma, which grew 11% to £197 million ($317 million). "We remain confident in the long-term growth prospects of this business," Witty said, adding that GSK will keep investing to deliver market-beating growth in these countries.

And then there's the U.S., where drug and vaccine sales growth was fueled by the respiratory drug Advair and bipolar treatment Lamictal, and by "encouraging performance from new products," particularly cancer drugs. Plus, the end of a co-promotion agreement on Vesicare delivered £174 million ($280 million) to the top line.

Throughout the earnings release, GSK cites European price cuts, disruption in the Middle East, funding cuts for vaccines, and government vaccine tenders. (Generic competition, too, of course.) It makes for quite a political press announcement. But then, Witty talks politics more than the typical pharma CEO does. And he remains upbeat about a return to growth this year. Besides the political head winds, "we also continue to see attractive growth opportunities across our businesses," Witty said, "and we intend to continue to invest behind them to strengthen the breadth and mix of the group and its future growth prospects."

- read the GSK statement (PDF)

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