Glaxo Warns Advair Rivals in U.S. Could Erase Profit Growth

  • Shares of U.K. drugmaker drop by most in three months
  • Generics by mid-year could curtail U.S. Advair sales

GSK CEO on Drug Pricing, Regulation, Succession

GlaxoSmithKline Plc said profit growth this year is at risk of getting wiped out by rival drugmakers who want to start marketing cheaper copycat versions of its top-selling asthma medicine Advair in the U.S.

Profit will rise by 5 percent to 7 percent if generic competitors to the respiratory treatment don’t enter the U.S. market, the U.K.’s biggest drugmaker said in a statement on Wednesday. If they do start selling their versions around mid-year, that could pare U.S. sales of Advair to 1 billion pounds ($1.25 billion) and lead to a “flat to slight decline” in profit growth. Shares of Glaxo dropped by the most in three months.

Emma Walmsley

Source: GlaxoSmithKline Plc

Emma Walmsley, who takes over as chief executive at the end of next month, will inherit the challenge of accelerating revenue from promising new medicines in time to help offset the erosion of Advair’s sales. The company has pledged that new products, including its blockbuster HIV medicines and vaccines for meningitis, will generate six billion pounds in annual sales next year.

Trying to predict the timing of the Advair generics is like “trying to pin a tail on a donkey with a blindfold on,” Andrew Witty, the current CEO, said in a Bloomberg Television interview with Jonathan Ferro. The potential impact of the copycat medicines is also uncertain, the drugmaker said.

Witty is scheduled to retire on March 31, making way for the first woman to take the helm of one of the world’s largest drugmakers.

Advair Swoons

Revenue from Advair fell by 15 percent to 3.49 billion pounds last year, assuming constant exchange rates, Glaxo said. Analysts had forecast that its revenue this year would drop to 2.73 billion pounds globally, and plummet to 1.97 billion pounds in 2018, according to the average of estimates compiled by Bloomberg. The U.S. Food and Drug Administration is due to decide by the end of March on the first copy of Advair, from Mylan NV.

Shares of Glaxo fell 0.8 percent to 1,549.50 pence as of 1:19 p.m. in London trading, after earlier dropping as much as 2.9 percent, or by the most since Nov. 3. The stock had advanced 15 percent over the past year.

The drugmaker’s 2016 core earnings per share, a measure of profit used by Glaxo that excludes some costs, climbed for the first time in three years, rising 35 percent to 1.02 British pounds. That compared with the 1.01-pound average of estimates compiled by Bloomberg. Sales last year rose 17 percent to 27.9 billion pounds, and compared with a 27.7 billion-pound average estimate.

Revenue from its pharmaceutical business grew by 3 percent, assuming constant exchange rates, to 16.1 billion pounds, while the vaccines operations expanded 14 percent to 4.59 billion pounds. Consumer healthcare, the division that Walmsley ran before her promotion, generated 7.19 billion pounds in sales, posting a 9 percent growth.

    Before it's here, it's on the Bloomberg Terminal.