Glaxo Sees Hope for Respiratory Drugs as Earnings Beat EstimatesOliver Staley
GlaxoSmithKline Plc, the U.K.’s biggest drugmaker, signaled the start of a turnaround in its troubled respiratory medicine business as the company reported fourth-quarter earnings that beat analyst estimates.
After struggling with slumping U.S. sales for its lung medicines, Glaxo may have turned a corner by cutting prices to gain access to the lists of drugs that payers will reimburse, Chief Executive Officer Andrew Witty said.
“We are starting to see some early indications” of regained market share, Witty told reporters on a conference call. “The very early signals are 100 percent consistent with what we hoped would happen following the adjustments.”
Advair, Glaxo’s best-selling asthma drug, generated 1.1 billion pounds ($1.67 billion) in revenue in the fourth quarter, meeting the average analyst estimate. Breo, a successor to Advair, exceeded estimates by 35 percent, with sales of 38 million pounds.
Glaxo’s stock rose 1.6 percent to 1,476 pence at the close of trading in London. That extended the advance this year to 7.3 percent.
While sales of Advair will continue to decline, Witty said Glaxo’s combination of new respiratory drugs, including Breo, Anoro and Incruse, will probably exceed Advair’s peak sales, in 2013, of 5.3 billion pounds. Advair loses patent protection in the U.S. in 2016.
“Advair is not going to be the be-all and end-all of the GSK story, as it has been driving things for the past 10 years,” he said.
The positive signs on respiratory medicine came as Glaxo’s profit excluding certain items fell 9 percent from a year earlier to 1.77 billion pounds, or 27.3 pence a share, the London-based company said in a statement. Analysts expected 26.5 pence a share, the average of 12 estimates compiled by Bloomberg.
Glaxo’s revenue from HIV treatments climbed 25 percent as sales of two new drugs exceeded the company’s expectations. Oncology sales in the U.S. rose 45 percent, led by Votrient for tumors of the kidney and soft tissue, and Promacta for blood disorders. The company also benefited from a lower tax rate.
Glaxo’s total revenue for the quarter was 6.19 billion pounds, beating the average estimate.
Glaxo’s results suggest the company may have put the worst behind it, said Mick Cooper, an analyst at Edison Investment Research.
“These results highlight how 2014 has been a tough year,” Cooper said in a note. “This year should be better in many ways, with the respiratory franchise returning to growth, the visibility on the positive impacts of the complex Novartis deals improving, as well as looking forward to more of the value inherent in the ViiV shareholding being realized.”
Last year, Novartis AS agreed to buy Glaxo’s cancer drugs business for as much as $16 billion while selling most of its own vaccines division to Glaxo for as much as $7.1 billion. Glaxo and Novartis will also form a joint venture to sell consumer health products.
The company last year announced it would explore spinning off a portion of its stake in ViiV, an HIV-drug unit created in 2009. The unit is a joint venture with Pfizer Inc. and Shionogi & Co.
Witty said he is open to considering possible spinoffs of the new vaccines and consumer health business as well.
“I don’t have a religious commitment to any particular kind of corporate structure,” he said. “If there are alternative approaches which can meet those objectives in a better way, then we should always be open-minded to those.”