GSK sales fall in US in first half
Operating profit hit by £1.8bn of legal costs
GlaxoSmithKline’s diversified sales base is helping to reduce the UK pharmaceutical giant’s reliance on sales generated in ‘white pills/Western markets’ and offset the decline in sales in its US pharmaceuticals market during the first half of 2010.
Total Group turnover in the first six months grew 7% to £14.4bn, with pharmaceutical turnover up 7% to £11.9bn.
US pharmaceuticals sales fell by 7% to £3.8bn, primarily due to the impact of generic competition to Valtrex, the discontinuation of GSK’s promotion of Boniva, the sale of Wellbutrin XL in 2009 and lower Avandia sales, only partially offset by the acquisition of Stiefel.
The decline in the US was more than offset by growth in all other regions: Europe (+9% to £3.5bn), Emerging Markets (+30% to £1.7bn) and Asia Pacific/Japan (+27% to £1.6bn).
Total vaccine sales grew 70% to £2.4bn, including £973m of H1N1 vaccine sales.
Andrew Witty, chief executive of GSK, is confident that the firm's performance will improve in the US. However, he acknowledged that in the short term US business performance would be masked by the continued impact of generic competition and reductions in pricing resulting from healthcare reforms.
Operating profit before major restructuring for the first half of 2010 was £3.04bn, a 34% decline primarily due to significant legal costs of £1.8bn incurred in the second quarter.
The company said it was taking a charge against second-quarter earnings for the costs of settling court cases over the antidepressant Paxil and diabetes drug Avandia, and other provisions for long-standing legal cases, which also include an investigation of its facility in Cidra, Puerto Rico.
GSK said it had settled the vast majority of product liability cases involving Paxil, which has been linked to birth defects, and a substantial majority of liability cases involving Avandia, which has been associated with a higher risk of heart disease. The firm has also settled antitrust litigation involving Canadian drug maker Apotex.
US pharmaceuticals operating profit fell by 17%. Europe, by comparison, saw operating profit increase by 16%; emerging markets by 51% and Asia Pacific/Japan by 40%. GSK said the increase in these three regions was mainly owing to significant H1N1 sales.