Generics and Avandia decline will hold GSK back
pharmafile | February 8, 2008 | News story | Sales and Marketing |Â Â Â
GlaxoSmithKline's chief executive-in-waiting Andrew Witty faces a difficult first year at the helm of the company after sales growth was pinned back by generic competition and declining Avandia sales.
Witty takes over from Jean Pierre Garnier as chief executive in April, and will inherit a well-stocked pipeline of promising drugs, but also problems with generic competitors and continuing doubts about Avandia's safety.
Sales of Avandia fell 34% over the full year of 2007, dragged down by a 40% fall in the most important market, the US. While the rate of decline in sales of the drug has slowed, it looks unlikely to recover lost ground in 2008, seriously undermining earnings.
Meanwhile, antidepressant Paxil CR and epilepsy treatment Lamictal are among a handful of GSK drugs facing new generic competition, which will wipe billions off earnings in 2008 and beyond.
Outgoing chief executive JP Garnier did have some good news to announce in his final results presentation, with solid earnings per share and a maturing pipeline helping to appease investors.
"Despite a significant setback on Avandia, good sales performance from other areas of our broad portfolio enabled GSK to deliver 10% EPS growth in 2007 – at the high end of our guidance," he said.
"The shadow of Avandia will continue over us in 2008 and make life a little bit more difficult for us," Garnier conceded. "But underneath all this, you have a very strong business. In fact, without the Avandia incident, the company would have grown 19% in 2007."
Strong growth in its vaccines business, a 'resurgence' of the consumer healthcare division and sales increases in top earning drugs (Advair/Seretide up 10%, Lamictal up 18%) brought good news, but could not prevent the year's turnover slipping 2% and operating profit falling 3%.
Last year GSK received a record 10 product approvals and this year expects regulatory decisions on more than 10 new product opportunities, which will be crucial to the long-term health of the business.
Following its debut in the US in March 2007, breast cancer drug Tyverb (known as Tykerb in the US) will be launched in Europe in early 2008 and is expected to gain approval in Japan toward the end of the year.
Allergic rhinitis product Veramyst/Avamys was launched in the US in June and is expected to be launched in Europe within the next few months, while a new skin infection treatment Altabax/Altargo has also recently hit the market.
But the progress of cervical cancer vaccine Cervarix is not so promising in the US, where the FDA continues to hold up its approval. The regulator is demanding further clinical data, which could delay its launch until 2010.
Andrew Witty indicated his early priorities would be to ensure strong expansion into emerging markets, consolidate its consumer health activities and further 'rejuvenate' the company's research and development.
