GlaxoSmithKline, one of the worlds biggest drugmakers, reported slumping sales and lower profits in the first quarter as its global best-seller, Advair, lost traction in the United States and sales continued to sag in China in the wake of a bribery investigation.
GSK is shifting its emphasis to respiratory and vaccine products as it contends with emerging competitors, expiring patents and other disruptions. As part of the focus on consumer products, GSK last week announced a three-way deal in which the British drugmaker is swapping its oncology business for vaccines with Novartis, another large Triangle employer, and creating a joint consumer health care business.
GSK employs about 4,500 people at its North American headquarters in Research Triangle Park and about 500 at its manufacturing facility in Zebulon, where it makes or packages more than 20 medications, including commonly prescribed asthma treatments Advair and Flovent.
The companys CEO, Andrew Witty, told analysts Wednesday that GSK is responding to the challenge with more than 40 new products in the pipeline to make up for sales declines. Some of these potential big sellers are being developed in the Triangle and would be produced here.
This quarter has amply demonstrated the very significant changes that are underway in GSKs portfolio, Witty said in a statement. Our strategy to broaden the companys sales base is evidenced with the transition we are making to new products in our core franchises.
Sales fell 13 percent to $9.3 billion, while operating profit fell 30 percent to $1.7 billion, and earnings per share dropped 33 percent to 23.1 cents. However, favorable currency exchanges mitigated the scale of the losses to 6 percent in sales, 12 percent in operating profit and 4 percent in earnings per share.
The company said that U.S. sales of pharmaceuticals and vaccines were down 10 percent as a result of drugstore pharmacies stocking fewer GSK products. GSK said increased competition to Advair, an asthma inhaler, resulted in a steep reduction to market share in the quarter.
In January, Express Scripts, the biggest U.S. pharmacy-benefits manager, removed GSKs Advair and Breo from its list of medicines covered by insurance companies, opting for cheaper alternatives. Patients can buy excluded drugs but must pay the full retail price.
Advair has been on the market for about 14 years and has patent protection until August 2016, at which point competitors can market generic equivalents. Advair generated $1.7 billion in worldwide sales in the first quarter, nearly a quarter of GSKs global drug and vaccine sales, including $755 million in the U.S. In previous quarters Advair sales in the U.S. have exceeded $1 billion.
Ultimately, drug purchases by customers are driven by doctor prescriptions, but a doctors decision to prescribe is influenced by a host of factors, including insurance reimbursement. Patients, insurers and doctors are focusing increasingly on drug prices in an effort to keep down health care costs, putting pressure on brand-name drugs such as Advair to compete with generics or cheaper alternatives.
As Advair sales seem to have peaked, GSK recently launched Breo as a successor, but its adoption has been slower than anticipated owing to delays in payer coverage, the company said. GSK said it will submit regulatory applications for Breo for treatment of asthma in the United States and has six new respiratory products in late-stage development.
Breo is currently approved in the U.S. for chronic obstructive pulmonary disease. It is made in the U.K., but manufacturing is slated to expand to the Zebulon facility next year.
We have priced those medicines very competitively, very fairly, particularly for the U.S. marketplace, Witty told journalists in a conference call in reference to new products Breo and Anoro, another treatment for chronic obstructive pulmonary disease. As we build up the successor products for Advair, not just in respiratory but in HIV and elsewhere, our capacity to be able to absorb pressure on Advair, which is inevitable as it matures, simply gets greater.
GSK shares closed Wednesday at $55.37, down $1.02. The stock is up 3.7 percent this year.