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GSK achieving strategic priorities

GSK's Andrew Witty says positive Q3 figures show that the company is successfully refocusing its business

As GlaxoSmithKline (GSK) announced positive Q3 figures, chief executive officer, Andrew Witty, said the results showed that the company was successfully refocusing its business.

GSK's three key strategic targets are to grow a diversified global business, deliver more products of value and simplify operations.

Total sales in Q3 were up 3 per cent, marking a return to growth. Sales in emerging markets were up 25 per cent; in Japan, up 19 per cent, and in consumer healthcare up 8 per cent.

Less than 30 per cent of this quarter's sales were generated from the white pill/Western markets, compared to 38 per cent in the second quarter of 2008, reflecting the move to grow and diversify into other markets, stated Witty in his Q3 review.

Sales in emerging markets now represent 14 per cent of pharmaceutical turnover, up 2 per cent compared to the same time last year, with growth being driven by products such as Seretide, Augmentin and vaccines, as well as through newly acquired products, which contributed over £35m this quarter. 

GSK strengthened its long-term presence in these markets with two partnerships in Q3. In Brazil, a 10-year agreement has been signed with the Fiocruz Foundation to supply Synflorix, while in China, the company has agreed to work with Walvax Biotech Company to develop paediatric vaccines.  

In Japan, Cervarix has been approved and a regulatory application for Promacta has been submitted.

In addition, the company has received regulatory clearance for four major new products this year: Allermist, Avolve (Avodart), Cervarix and Tykerb. 

Vaccine sales are lower this quarter, in part due to phasing of shipments. Year-to-date sales are up 8 per cent to nearly £2.2bn, representing 11 per cent of the group's turnover. 

GSK's US business continues to undergo major transition, reflected by a 12 per cent drop in sales. Overall, the number of products facing generic competition is reducing, although Witty believes 2010 will remain challenging as the impact of expected generic competition to Valtrex is absorbed. However, the number of new products is increasing, with US approvals for Cervarix, Votrient and Arzerra in October alone. Also this quarter, two key Food and Drug Administration (FDA) filings have been completed for Avodart and Menhibrix.

In Europe, approval has been granted for Pandemrix, the pandemic H1N1 vaccine, after more than 10 years of investment and research of pandemic influenza. To date, there are orders worldwide for approximately 440 million doses of the vaccine.

The positive impact on sales growth of the acquisitions made over the last 12 months is becoming apparent, with Stiefel dermatology products contributing more than £100m of sales this quarter. 

Further, the restructuring to deliver £1.7bn in annual savings is making good progress, with cumulative annual cost savings amounting to £1bn. 

This quarter, darapladib, a potential new treatment for atherosclerosis, passed a key checkpoint in its phase III development programme by meeting interim safety criteria in the STABILITY trial. Witty confirmed that development of this asset will therefore continue as planned, with another large-scale CV outcome study due to commence shortly. Phase III trials for project Horizon in COPD also commenced in October. 

Witty concluded: "Our third quarter performance reinforces our expectations of an improved performance for GSK in the second half of 2009. In the fourth quarter, I expect further improvement, including significant sales generated from our influenza products. 

"The progress we have made so far provides us with a strong platform to realise our  long-term objective of delivering sustainable growth for shareholders."

29th October 2009

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