News Column

GSK lowers full-year forecast after Q2 sales fall

July 23, 2014

By John Murawski, The News & Observer (Raleigh, N.C.)

July 23--GlaxoSmithKline reported a hit in second-quarter sales and profit Wednesday amid weakening sales of blockbuster products used by millions of Americans, forcing the giant drugmaker to lower its earnings forecast for the year.

The British company's sales fell 4 percent globally to $9.3 billion, pushed down by a 10 percent sales drop-off in the United States and a 25 percent decline in China, where that country's government is investigating bribery allegations against GSK employees.

Contributing to declining sales is the continuing decrease in sales of Advair, GSK's biggest global seller, which fell 12 percent in the second quarter. GSK's stock fell 6 percent on the day, closing at $50.04 a share.

"This has been a challenging quarter," GSK Chief Financial Officer Simon Dingemans told analysts on a conference call. "Given where we are year to date, we no longer expect to grow sales this year."

The company's global sales are followed closely in the Triangle, where the company employs about 5,000 people and manufactures and packages more than 20 medications, including commonly prescribed asthma treatments Advair and Flovent.

GSK employs about 4,500 people at its North American headquarters in Research Triangle Park and about 500 at its manufacturing facility in Zebulon. Local operations here and elsewhere are periodically shaken up by staff reductions and other adjustments as GSK strives to bolster sales and develop new products.

Glaxo CEO Andrew Witty told analysts that GSK is seeking to "replace the significant sales being lost to generics and ensure that the company can succeed in an environment where our biggest product Advair faces increasing competition."

Advair has been on the market about 14 years and has patent protection for two more years. The asthma inhaler generated $887 million in sales in the United States in the second quarter and more than $1.8 billion worldwide, generating more than five times as much global revenue as GSK's runner-up, the children's vaccine Pediarix, which is used to immunize against diphtheria, tetanus, pertussis, infection from the hepatitis B virus and poliomyelitis.

GSK is transitioning to newer respiratory drugs to replace lost Advair sales and is developing more than 40 products to replace drugs with expiring patents that will face competition from cheaper generics. Witty said 30 have the potential to be "first in class." A number of these are being developed in the Triangle and would be produced and packaged in Zebulon.

Murawski: 919-829-8932


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