GSK reports Q4 loss as legal costs bite
Pharmaceuticals sales fall, although emerging markets see growth
GlaxoSmithKline reported a fourth-quarter net loss as a result of a legal charge of £2.2bn from claims related to diabetes drug Avandia, although sales of new products were strong and there was continued expansion in emerging markets.
The UK drugmaker said its net loss totalled £690m (US$1.12bn) in the three months to 31 December 2010, compared with a profit of £1.63bn in the previous year.
Excluding restructuring charges, the fourth-quarter loss was £384m compared with a profit of £1.80bn.
Turnover was down 13% at constant exchange rates to £7.20bn.
Pharmaceuticals sales were down 16% to £5.9bn, as generic competition cut sales of herpes drug Valtrex by 60% to £96m, and sales of Avandia fell 76% to £49m after the European Medicines Agency suspended marketing authorisation for the diabetes drug and its use in the US was restricted. GSK said future global sales of Avandia would be minimal.
Seretide/Advair for asthma and chronic obstructive pulmonary disease fell 4% to £1.35m in the quarter, although it saw growth of 14% to £85m in emerging markets.
Strong performances were achieved by breast cancer drug Tykerb (+23% to £60m), Avodart, for the treatment of benign prostastic hyperplasia (+22% to £177m) and heart disease drug Lovaza (+11% to £147m).
Total vaccine sales (excluding pandemic sales) were £833m (+20%) and dermatology sales grew 10% to £288m.
Chief executive Andrew Witty said GSK’s business model over the last two-and-a-half years had been ‘substantially re-engineered’ through a major restructuring and a returns-based approach to the allocation of resources.
Witty acknowledged that the company was also having to deal with long-standing legal cases and that ‘the scale of legal provisioning that has been required is significant’.
However, he said he continued to believe that it is in the company's best interests to ‘resolve this inherent unpredictability and reduce our overall litigation exposure’.
‘The changes we have made are delivering diversified underlying sales growth, increasing pipeline potential and improved cash generation,’ he added.
In 2011, GSK expects underlying sales momentum to continue and translate into sustainable reported growth in 2012.
‘This expectation includes our assessment for further pricing reductions in the US and Europe, which is expected to amount to an incremental £325m in 2011,’ said Witty.