Flat sales combined with hefty restructuring charges and legal fees added up to a $456 million loss for Glaxo SmithKline in the second quarter.
The British pharmaceutical giant, which has its North American headquarters in Research Triangle Park, reported that U.S. pharmaceutical sales fell 13 percent in the second quarter, a decline that was offset by increased sales elsewhere around the world. Sales of consumer products such as Sensodyne toothpaste rose 3 percent.
GSK said last week that it would spend a record amount - $2.36 billion - on legal settlements and fees in the second quarter. Much of that money will go to settle "the substantial majority" of personal injury lawsuits filed by patients who claim they suffered heart attacks and strokes from taking the diabetes drug Avandia, and to settle antitrust and patent infringement lawsuits involving the antidepressant Paxil.
"Now that the Avandia litigation has largely been settled, it removes a major overhang and makes Glaxo more investable," Deutsche Bank analyst Alex Evans told Bloomberg News. "You can now assess the business much more on its pure fundamentals."
Last week, a Food and Drug Administration advisory panel recommended that Avandia remain on the market despite a finding that it increases the risk of heart attacks. The FDA said Wednesday that it ordered GSK to suspend enrolling new patients in a large clinical trial of Avandia while it evaluates the panel's findings.
Excluding restructuring costs, the company reported a second-quarter profit of $273 million, down 96 percent after adjusting for currency fluctuations.
Revenue totaled $10.5 billion, unchanged from a year ago.
U.S. sales were hurt by generic competition to the genital herpes medicine Valtrex and a "faster erosion" of Avandia sales, noted Julian Heslop, the company's chief financial officer. U.S. Avandia sales declined 43 percent during the quarter.
CEO Andrew Witty called the U.S. "probably our biggest challenging marketplace over the last couple of years," during a conference call with analysts.
"Going forward, we are confident our competitiveness in the U.S. market will improve," Witty said in a prepared statement.
Still, lower drug prices because of health care reform could continue to hurt GSK's performance, he added.
Restructuring costs totaled $885 million in the second quarter. Like other large drug companies, GSK has been laying off employees and working to improve the productivity of its research-and-development efforts in recent years.
"We need R&D to be more effective and more efficient," Witty said. "We need manufacturing to be more efficient, and we need the commercial model to be more efficient. All of those things have been focus areas for the last couple of years and remain focus areas."
GSK now employs about 5,000 people in the Triangle, after cutting hundreds of local jobs.
Witty said the restructuring already is paying off, noting that for the first time in a long time, the company moved five new drugs into the final phase of clinical testing during the quarter.
"Can we deliver five every quarter? Absolutely not," he said. "Are we more confident than we have been for a long time we can deliver a sustainable flow of [drugs] year over year? Yeah, I think we are."
The company's stocklike American Depositary Receipts fell 1 cent to $36.36 on Wednesday and are down 14 percent this year.
