Glaxo Happy to Be ‘Interested Observer’ of Astra SaleOliver Staley
GlaxoSmithKline Plc, the U.K.’s biggest drugmaker, is happy to remain an “interested observer” rather than get involved in the potential sale of rival AstraZeneca Plc, Chief Executive Officer Andrew Witty said.
Glaxo announced a series of multi billion-dollar transactions with Novartis AG last week and isn’t looking for another major deal, Witty said today on a conference call as the London-based company reported earnings that met analysts’ estimates. Smaller acquisitions make more sense for Glaxo because they’re less disruptive, he said.
Pfizer Inc. said on April 28 it’s interested in buying AstraZeneca for about $99 billion, in what would be a record buyout for the industry. Glaxo said April 22 it intends to sell its cancer drugs to Novartis for as much as $16 billion and buy most of the Swiss company’s vaccines business for up to $7.1 billion. The two plan a joint venture for consumer products.
“It is my preference to do these things in a very, very targeted way,” Witty said. “No matter how difficult or complex the transaction is, you only have to focus on the thing you’re focused on. You’re not focused on the other 20 or 30 things you’re not interested in.”
While Glaxo would look to hire talented AstraZeneca employees who become available if New York-based Pfizer does buy the company, “we’re not really sitting here opportunistically waiting for things like that,” Witty said. “We have a strategy of our own.”
Glaxo is losing market share in the U.S. for Advair, a lung-disease medication and its best-seller, after the country’s largest pharmacy-benefits manager stopped reimbursing prescriptions. The drugmaker is in a period of transition as older medicines face competition and new ones like respiratory treatment Breo Ellipta are introduced, Witty said.
“Inevitably, in the short run we’ll have some volatility as we transition from older products to a new portfolio,” he said. “Clearly, Advair did not have a very strong first quarter.”
Advair sales in the U.S. fell 30 percent in the period to 455 million pounds ($767 million), helping pull down drug and vaccine sales in the country by 10 percent.
Glaxo’s profit excluding certain items fell 18 percent to 1.53 billion pounds ($2.58 billion), or 21 pence a share, the company said today in a statement. That was in line with the average of 13 analyst estimates.
Glaxo fell 2 percent to 1,632 pence at 4:35 p.m. in London trading. The shares have gained about 3.5 percent in the last year, including reinvested dividends.
Sales in China fell 20 percent, continuing their slump from last year, after the government there said it would investigate allegations of bribery of hospitals and doctors by Glaxo employees. Glaxo’s total revenue dipped 10 percent to 5.61 billion pounds, missing the average analyst estimate of 5.82 billion pounds. Advair sales declined 15 percent to 1.04 billion pounds.
“GSK’s reliance on Advair has long been a concern for investors,” said Alistair Campbell, an analyst at Berenberg Bank, in a note to investors. “That is why the respiratory products being rolled out now are vital to the future of this franchise. We remain skeptical on Breo and the Q1 U.S. sales number of 1 million pounds does not impress.”
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.
The Glaxo deals with Novartis are expected to close next year. Pfizer, which paid $64 billion to buy Wyeth in 2009 in the biggest pharmaceutical takeover, is considering its AstraZeneca bid options after the U.K. company said the initial proposal was too low.