GSK struggles to maintain respiratory dominance
Something seems to be going awry with GlaxoSmithKline's game plan for its respiratory franchise, with new products positioned to replace ageing blockbuster Advair/Seretide not performing in the field.
Group sales fell 4 per cent to £5.6 billion ($9.5 billion) in the second quarter, with Advair/Seretide (fluticasone propionate and salmeterol) hit harder than expected by increasing competition in the asthma and chronic obstructive pulmonary disease (COPD) sectors, falling 12 per cent to a little over £1.09 billion and down 19 per cent in the US.
GSK chief executive Andrew Witty told investors yesterday that Advair/Seretide sales are likely to continue to decline, although he insisted that the company is starting to see "some recovery in our overall respiratory volume share as new launches progress, albeit at lower price points."
Meanwhile, sales of the products introduced to replace Advair/Seretide missed consensus estimates, with Breo (fluticasone furoate and vilanterol) bringing in £11 million and Anoro (umeclidinium and vilanterol) just £5 million, respectively 32 and 35 per cent shy of analyst predictions.
Weakness in the respiratory franchise - along with what analysts at Panmure Gordon described as "cautious language" and a lowered earnings forecast for the year - led to a fall-off in GSK's share price on heavy trading volumes in the wake of the results announcement.
GSK now says earnings in 2014 will be in line with last year, having previously said it expected growth of 4 to 8 per cent.
Witty said on the results call that in the last three months the combination of Advair/Seretide and Breo has actually stabilised in terms of market share - and has started to show signs of growth - and the contribution of Anoro and monotherapy Incruse (umeclidinium) should accelerate that process.
"While the respiratory launches are clearly developing more slowly, we've always expected that it would take time and investment to build them to their full potential," he said.
The strength of sterling and ongoing effects of the Chinese corruption scandal - along with what Witty said was "earlier and sharper" competition than expected to the company's cardiovascular drug Lovaza (omega-3-acid ethyl esters) from generic competition - also weighed on the company's finances in the quarter.
"The business remains under pressure, with a number of headwinds, but we can expect it to emerge stronger" in the second half of 2015, said PG analyst Savvas Neophytou in a research note.
There were positive signs for GSK in the form of lupus treatment Benlysta (belimumab), which grew 21 per cent to £41 million and Promacta/Revolade (eltrombopag) for immune thrombocytopenia (ITP) which rose 36 per cent to £55 million.
GSK's joint venture with Pfizer in HIV - ViiV Healthcare - posted 13 per cent sales increase to $352 million on the back of integrase inhibitor Tivicay (dolutegravir), which Witty said is "on course to be one of our best launches."
The cancer portfolio also put in a buoyant performance, particularly Votrient (pazopanib) for sarcoma which climbed 41 per cent to £101 million. The latter product will of course not have an impact on GSK's future growth, as it is one of the oncology assets the drugmaker agreed to transfer to Novartis earlier this year.
Witty said GSK's pipeline - with 40 new molecular entities in late-stage development - will deliver the goods for the company over the next "seven or eight years".
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