Glaxo Profit Falls on Sluggish U.S. Respiratory Sales

GlaxoSmithKline Plc, the U.K.’s biggest drugmaker, said second-quarter earnings missed analyst estimates as sales of its respiratory drugs in the U.S. remain sluggish. The company cut its forecast for the year.

Profit excluding certain items fell to 1.41 billion pounds ($2.4 billion), or 19.1 pence a share, from 1.88 billion pounds, or 25.3 pence a share, the London-based company said today in a statement. Analysts expected 21.6 pence a share, based on the average of nine estimates compiled by Bloomberg.

Glaxo is losing market share in the U.S. for Advair, a lung medication that’s the company’s best-selling product, after it lost patent protection and the country’s largest pharmacy-benefits manager stopped reimbursing prescriptions. Efforts to introduce two new lung drugs, Breo and Anoro, to help replace Advair revenue have taken longer to bear fruit than the company anticipated. The cost of introducing new products also hurt profit.

“Our strategy to transition and diversify our respiratory portfolio is under way,” Chief Executive Officer Andrew Witty said in the statement. “We expect the transition of this portfolio to continue over the next two to three years and remain confident that GSK will maintain its leadership position in respiratory well into the next decade.”

Sales for the quarter fell 4 percent at constant-exchange rates to 5.56 billion pounds, missing analysts’ estimate of 5.75 billion pounds. The pound reached $1.71 in the second quarter, the highest level since 2008, reducing the profit of U.S. revenue. Pharmaceutical and vaccine sales there fell 10 percent.

Forecast Cut

Advair sales declined 12 percent to 1.1 billion pounds. Generic competition for Lovaza, a heart medicine with about 607 million pounds in sales last year, “has been more substantive and began earlier than we expected,” Glaxo said.

For the year, Glaxo expects full-year EPS at constant-exchange rates and excluding divestments to be similar to last year and doesn’t see a sales increase. The company in February forecast EPS growth of 4 percent to 8 percent and a sales gain for about 2 percent.

Glaxo fell 2.6 percent to 1,514 pence at 12:50 p.m. in London trading. The stock has declined 3.7 percent this year including reinvested dividends, compared with a 15 percent return in the Bloomberg Europe Pharmaceutical Index.

China Probe

China began a probe last year into Glaxo’s sales practices in the country, detaining some of its employees there. In May, Chinese police handed the bribery case to prosecutors, accusing a British executive of ordering workers to illegally pay doctors, hospitals and medical associations to boost sales. Revenue in the country fell 25 percent to 129 million pounds in the second quarter.

Glaxo said it’s cooperating with Chinese officials and is conducting an internal investigation. The U.K. Serious Fraud Office has also opened a probe.

The company is selling some of its established products, which are expected to have 1 billion pounds in revenue this year. Potential purchasers include private-equity firms and mid-tier pharmaceutical companies, Witty told journalists on a conference call today. Glaxo expects to complete the sale by the end of the year.

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