Glaxo Sees 2014 Profit, Sales Rising on New ProductsMakiko Kitamura
GlaxoSmithKline Plc forecast that revenue will rise by about 2 percent this year as the U.K.’s biggest drugmaker introduces new medicines to protect its lucrative respiratory business.
Earnings per share excluding some items will increase by 4 percent to 8 percent at constant exchange rates, the London-based company said today in a statement. By that measure, profit gained 4 percent in 2013, while sales rose 1 percent.
Glaxo won approval of two new lung drugs, Breo and Anoro, last year. The company’s top-selling product, Advair for smokers’ cough and asthma, is facing increasing competition from a newly approved generic in Europe and cheaper options in the U.S. Glaxo has received “excellent” reaction from physicians to Breo, which is now is covered by 25 percent of Medicare prescription-drug plans in the U.S., Chief Executive Officer Andrew Witty said.
“I’m delighted with the progress we’ve made,” Witty told reporters in London today. “The demise of GSK respiratory has often been exaggerated.”
Glaxo won approval for four other new products last year for skin cancer, HIV and influenza. Albiglutide for Type 2 diabetes was recommended for approval by the European Union’s drug regulator last month, and the company expects data from six late-stage clinical trials this year. Glaxo also plans to start the last phase of human testing for about 10 medicines this year and next.
Profit excluding some items fell 8 percent to 2.09 billion pounds ($3.4 billion), or 30.1 pence a share, in the fourth quarter from a year earlier. That missed the average estimate of 30.8 pence from 11 analysts surveyed by Bloomberg. Revenue increased 2 percent to 6.91 billion pounds, beating the average estimate of 6.84 billion pounds.
The 2014 forecast is “a touch disappointing but at least guides for underlying growth, and the potential for margin improvement as the top line recovers,” Alistair Campbell, a London-based analyst for Berenberg, wrote in a note to clients.
The introduction of Breo will also probably be disappointing, said Tim Anderson, an analyst at Sanford C. Bernstein & Co. in New York, in a note to investors.
“While GSK’s delivery from its pipeline has improved in looking forward from here, there seems to be fewer important pipeline-related catalysts ahead,” said Tim Anderson, an analyst at Bernstein Research in New York.
Glaxo shares rose 1.6 percent to 1,579.50 pence at the close of trading in London, giving the company a market value of 76.7 billion pounds. The stock has gained 15 percent in the last year including reinvested dividends, compared with a 21 percent return in the Bloomberg Europe Pharmaceutical Index.
The company said it plans to repurchase 1 billion pounds to 2 billion pounds of stock this year, compared with a 1.5 billion-pound buyback last year.
Pharmaceutical and vaccine sales in China were down 18 percent in the fourth quarter, led by declining sales of treatments for respiratory diseases and hepatitis, after a 61 percent plunge in the previous quarter as the company faces a bribery probe.
“It is not possible at this time to make a reliable estimate of the financial effect, if any, that could result from these matters,” the company said today.
Glaxo Chief Executive Officer Andrew Witty has said allegations by China’s government that company employees bribed hospitals, doctors and officials drove sales to some competitors with similar products. The company has conducted a review of its operations in other emerging markets and implemented additional anti-bribery controls and measures in higher-risk countries, Chief Financial Officer Simon Dingemans said in an interview last month.
This year, the company will focus on rebuilding its business in China and promoting new products, Dingemans said.
Successful product introductions will help offset growing pressures on Advair, which accounts for more than 25 percent of the company’s pharmaceutical and vaccine sales. In the U.S., Express Scripts Holding Co., the country’s biggest pharmacy-benefits manager, excluded Advair from its list of medicines covered by insurance companies that went into effect last month, in favor of cheaper alternatives made by AstraZeneca Plc and Merck & Co.
Express Scripts’ exclusion of Advair may cut the drug’s sales by about 170 million pounds this year, Barclays Plc analysts said in a note to investors yesterday. Advair sales were 5.27 billion pounds last year, with about half of that revenue coming from the U.S.
Generic competition for Advair is also looming. The U.S. Food and Drug Administration in September proposed a simpler route for rivals seeking to copy the drug. The patent on the delivery device for the medicine expires in 2016. A generic version of Advair from Novartis AG and partner Vectura Plc has already been approved in Germany and Denmark.
Glaxo is also divesting older products with low growth prospects. The company last year sold the Lucozade and Ribena drink brands to Suntory Beverage & Food Ltd. for 1.35 billion pounds as well as some injectable blood-clot treatments to Aspen Pharmacare Holdings Ltd. for 700 million pounds.