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Glaxo Profit Falls as Advair Sales Drop Compounds China

GlaxoSmithKline Plc Chief Executive Officer Andrew Witty said, “This quarter has amply demonstrated the very significant changes that are under way in GSK’s portfolio.” Photographer: Simon Dawson/Bloomberg
GlaxoSmithKline Plc Chief Executive Officer Andrew Witty said, “This quarter has amply demonstrated the very significant changes that are under way in GSK’s portfolio.” Photographer: Simon Dawson/Bloomberg

April 30 (Bloomberg) -- GlaxoSmithKline Plc, the U.K.’s biggest drugmaker, said first-quarter earnings fell 18 percent as competition in the U.S. and fallout from a bribery scandal in China depressed sales.

Profit excluding certain items fell to 1.53 billion pounds ($2.58 billion), or 21 pence a share, from 1.9 billion pounds, or 26.1 pence, a year earlier, the London-based company said today in a statement. Analysts expected 21 pence a share, based on the average of 13 estimates complied by Bloomberg.

Glaxo is losing market share in the U.S. for Advair, a respiratory-disease medication and its best-seller, after the country’s largest pharmacy-benefits manager stopped reimbursing prescriptions. Sales in China have slumped since last year, after the government there said it would investigate allegations of bribery of hospitals and doctors by Glaxo employees.

“This quarter has amply demonstrated the very significant changes that are under way in GSK’s portfolio,” Andrew Witty, Glaxo’s chief executive officer, said in the statement.

Glaxo fell as much as 2.9 percent and was down 1.6 percent to 1,639.5 pence at 12:49 p.m. in London trading. The shares have gained about 4 percent in the last year, including reinvested dividends.

On April 22, Glaxo said it was selling its cancer drugs to Novartis AG for as much as $16 billion, and that it was buying most of Novartis’s vaccine business for up to $7.1 billion. The two companies are also combining their consumer-products divisions to create a new joint venture to be majority owned by Glaxo. Those deals are expected to close in 2015.

Revenue Decline

Sales for the quarter fell 10 percent to 5.61 billion pounds, missing the average analyst estimate of 5.82 billion pounds. Revenue from Advair declined 15 percent to 1.04 billion pounds. A successor drug, Breo Ellipta, was introduced in the U.S. at the end of last year and had sales of 1 million pounds in that country in the first quarter. In China, revenue from pharmaceuticals and vaccines excluding established products were down 13 percent.

Glaxo withdrew its forecast for sales growth of about 2 percent this year, and now says only that sales will grow at constant-exchange rates excluding divestments, without specifying by how much. Witty cited generic competition in the U.S. for the heart drug Lovaza and price pressure. The company continues to forecast earnings per share growth of 4 percent to 8 percent.

To contact the reporter on this story: Oliver Staley in London at ostaley@bloomberg.net

To contact the editors responsible for this story: Phil Serafino at pserafino@bloomberg.net Kristen Hallam, David Risser

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