New products and influenza drugs offset turnover dip at GSK

GlaxoSmithKline (GSK) saw group turnover fall by 2% to £6.7bn in the first half as the pharmaceuticals company faces heavy generic competition in the US, having lost patent protection on a number of medicines including Lamictal, Imigran/Imitrex and Fionase.

Within pharmaceuticals, US turnover declined 15% to £2.3bn, but results were more positive elsewhere as European sales grew 1% to £1.7bn, sales in emerging markets rose 14% to £720m and in Asia Pacific/Japan increased by 6% to £609m.

GSK said growing sales of new products and its portfolio of influenza products should help drive its improving performance into the second half of the year.

Relenza sales were £60m in the second quarter, compared with £3m in the same period in 2008, reflecting continued orders from governments worldwide for pandemic stock-piling. By the end of this year GSK expects to have an annual production capacity of 190 million treatment courses of Relenza. It has contracts in place to supply 195 million doses of the vaccine.

Chief executive Andrew Witty said discussions with more than 50 governments were ongoing, with many at advanced stages. He expects further "significant orders" to be placed. Shipments will take place in the second half of 2009 and early in 2010. GSK will also reserve some production capacity to support developing countries.

New products including the Rotarix and Cervarix vaccines contributed £377m to second-quarter sales, compared with £265m in the first quarter of 2009.

In the past 12 months GSK has started to diversify and has entered into eight transactions to accelerate sales growth in emerging markets, including an extension of its partnership with Aspen, a new alliance with Dr Reddy's, further product acquisitions from BMS and a commitment to establish a joint venture in China with Neptunus to develop influenza vaccines.

Witty continues to see Japan as another key market as new products here have contributed more than £100m in revenue so far this year. Sales of Adoair alone are expected to reach more than £150m for the full year.

GSK has around 30 products in the late-stage pipeline and intends to file Menhibirix, a new vaccine to prevent meningitis in infants aged two months and above, in the US during the second half.

Phase III trials of the Horizon respiratory development programme will start in COPD in October. Other significant developments are Phase III results for Benlysta, which has the potential to become the first new treatment for systemic lupus, and Mosquirix, a vaccine to prevent malaria.

Witty said GSK was making "good progress" with its restructuring programme and is on track to deliver £1.7bn of annual pre-tax cost savings by 2011. But saving costs is not enough.

"We must do more to simplify our operations," he said. "This is one [area] in which I want to see an acceleration of activity." To do this the company has instigated a move towards a single Enterprise Resource Planning (ERP) platform.