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Same-Day Analysis
GSK Reports Highest Sales Growth in Two Years Following Relenza Boost and Currency Gains
Published: 10/29/2009
IHS Global Insight Perspective | |
Significance | GSK closes the third quarter with a strong performance boosted by the weak pound, pandemic flu vaccine sales, and emerging market growth. |
Implications | As a result, GSK was able to counter the effects of negative sales growth in the United States, although this issue is likely to persist as more products face patent expiry in the near future. |
Outlook | Following EU approval of its A/H1N1 flu vaccine, GSK can look forward to a stellar end-of-year performance thanks to pandemic flu vaccine sales, which are expected to fetch up to £1 billion. |
U.K. pharma giant and the world's second largest pharmaceutical company GlaxoSmithKline (GSK) has reported a solid set of third-quarter results, surpassing previous expectations. Overall, total turnover amounted to £ 6.7 billion, increasing by 3% year-on-year (y/y) at a constant exchange rate (CER), and 15% y/y on a reported basis. This was largely driven by the company's pharmaceutical business, which reported revenues of £5.6 billion, a y/y increase of 2% in CER and 14% on a reported basis. The Consumer Healthcare division generated £1.2 billion and grew 8% CER y/y, well over the market growth rate of 1.5%. Operating income as calculated by IHS Global Insight was up by an impressive 31% y/y on a reported basis, with the operating margin up by 3.7 percentage points y/y, reflecting gains made following cost savings as part of GSK's restructuring programme, which remains on track to deliver cost savings of £1.7 billion by the end of 2011. On the expenses side, the cost of sales was up 11% y/y in CER to £1.7 billion, and selling, general, and administrative (SG&A) expenses were up 9% y/y to £2.1 billion. In stark contract, GSK's spending on research and development (R&D) has decreased 4% y/y to £862 billion. However, at the same time, the company has an increasing number of drugs in development, reflecting efficiency gains.
Shifting Growth Strategy
New growth areas—namely emerging markets and Japan—have become key drivers of sales, and are up 25% y/y and 19% y/y respectively at CER, reflecting the diversification of sources of growth. Meanwhile, U.S. sales were down 12% y/y, reflecting the adverse effects associated with the effects of generic competition on major products. However, European sales grew by 3% y/y. In response to the ever-increasing emphasis on new growth markets, the company has decreased its U.S. sales force by 2,200, diverting the resources to its emerging markets sales force, hiring 2,200 new sales agents in those regions in order to strengthen its foothold in those markets. Overall sales in emerging markets now account for 14% of pharmaceutical sales, a 17% y/y increase.
GSK: Selected Financial Results, Q3 2009 | |||
Q2 2009 (£ mil.) | % Change (reported) | % Change (CER) | |
Total Revenue | 6,758.0 | 15 | 3 |
- Pharmaceuticals | 5,593.0 | 14 | 2 |
- Consumer Healthcare | 1,165.0 | 17 | 8 |
Cost of Sales | 1,732.0 | 19 | 11 |
SG&A Expenses | 2,064.0 | 24 | 9 |
R&D Spending | 862.0 | 3 | -4 |
R&D as % of Sales | 12.7 | 2.1 pp lower | N/A |
Operating Income * | 2,100.0 | 31 | N/A |
Operating Margin (%) ** | 31.0 | 3.7 pp higher | N/A |
Net Profit | 1,480.0 | 25 | -3 |
Source: GSK | |||
On the pharmaceutical product level, growth continues to be driven by GSK's Respiratory and Antiviral portfolios, which grew 6% y/y and 15% y/y respectively, with vaccines taking a notable hit, with a reported 2% y/y decrease. Key products continue to report dwindling sales due to genericisation in the United States. The most notable ones include Lamictal (lamotrigine, down 21% to £121 million), Imigran/Imitrex (sumatriptan, down 74% to £53 million), Flonase (fluticasone propionate, down 21% to £28 million), Requip (ropinirole, down 30% to £43 million), and Wellbutrin (bupropion, down 70% to £16 million).
Strong performers include anti-viral treatment Relenza (zanamivir), which clocked sales of £182 million due to government stocking, a growth of over 100% y/y. Blockbuster drug Seretide/Advair (salmeterol/fluticasone propionate) continues to be the company's biggest seller with reported sales of £1.6 billion, a 6% y/y increase thanks to growth in Japan and emerging markets. Other notable performers include oncology drug Tyverb/Tykerb (lapatinib, up 54% to £46 million), Lovaza (omega-3-acid ethyl esters, up 27% to £111 million), and Avodart (dutasteride, up 14% to £131 million). The muted vaccine portfolio performance was attributed to troughs in vaccines tenders; however, strong performances were noted from Boostrix and Rotarix, which grew 55% y/y to £39 million and 92% y/y to £84 million, respectively.
GSK: Leading Pharmaceutical Products, Q3 2009 | |||
Brand | Q3 2009 (£ mil.) | % Change (reported) | % Change (CER) |
Respiratory | 1,594 | 18 | 6 |
Seretide/Advair (fluticasone + salmeterol) | 1,152 | 17 | 5 |
Flixotide/Flovent (fluticasone) | 169 | 14 | - |
Ventolin (salbutamol) | 110 | - | 28 |
Flixonase/Flonase (fluticasone propionate) | 28 | -15 | -21 |
Serevent (salmeterol) | 54 | -10 | -18 |
Avamys/Veramyst (fluticasone furoate) | 31 | 82 | 59 |
Zyrtec (cetirizine) | 18 | - | >100 |
Anti-virals | 1,049 | 32 | 15 |
HIV | 392 | 4 | -7 |
Valtrex (valacyclovir) | 349 | 15 | -1 |
Relenza (zanamivir) | 182 | >100 | >100 |
Epzicom/Kivexa (abacavir + lamivudine) | 131 | 19 | 6 |
Combivir (zidovudine + lamivudine) | 102 | -7 | -15 |
Trizivir (abacavir + lamivudine + zidovudine) | 48 | -2 | -12 |
Zeffix (lamivudine) | 54 | 28 | 14 |
Agenerase/Lexiva (fosamprenavir calcium) | 43 | 7 | -3 |
Epivir (lamivudine) | 34 | -3 | -14 |
Ziagen (abacavir) | 26 | -4 | -11 |
Central Nervous System | 418 | -28 | -37 |
Lamictal (lamotrigine) | 121 | -11 | -21 |
Seroxat/Paxil (paroxetine) | 120 | 7 | -12 |
Imigran/Imitrex (sumatriptan) | 53 | -72 | -74 |
Wellbutrin, Wellbutrin XL (bupropion) | 16 | -70 | -70 |
Requip (ropinirole) | 43 | -23 | -30 |
Treximet (sumatriptan and naproxen sodium) | 15 | >100 | >100 |
Cardiovascular and Urogenital | 552 | 18 | 5 |
Avodart (dutasteride) | 134 | 28 | 14 |
Lovaza (omega-3-acid ethyl esters) | 111 | 48 | 27 |
Arixtra (fondaparinux sodium) | 60 | 36 | 20 |
Fraxiparine (nadroprarin) | 56 | -5 | -12 |
Coreg, Coreg CR (carvedilol) | 39 | -22 | -30 |
Vesicare (solifenacin) | 25 | 39 | 17 |
Levitra (vardenafil) | 20 | ? | 6 |
Volibris (ambrisentan) | 6 | ? | >100 |
Metabolic | 284 | -2 | -13 |
Avandia Products | 185 | -3 | -14 |
Avandia (rosiglitazone) | 108 | -8 | -19 |
Avandamet (rosiglitazone + metformin) | 66 | 5 | -6 |
Bonviva/Boniva (ibandronate sodium) | 60 | -7 | -5 |
Antibacterials | 376 | 10 | 3 |
Augmentin (amoxicillin and clavulanate) | 162 | 13 | 8 |
Oncology and Emesis | 149 | 16 | 4 |
Hycamtin (topotecan hydrochloride) | 41 | 20 | 9 |
Tykerb/Tyverb (lapatinib) | 46 | 77 | 54 |
Zofran (ondansetron) | 23 | -30 | -33 |
Promacta (eltrombopag) | 3 | - | - |
Vaccines | 802 | 10 | -2 |
Hepatitis | 170 | -2 | -12 |
Infanrix/Pediarix | 167 | -0.05 | -10 |
Rotarix | 84 | >100 | 92 |
Cervarix |
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