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GSK sales drop as austerity measures hit business in Europe

Revenues in region drop 9 per cent

GlaxoSmithKline (GSK) has reported a slide in sales and net earnings during the third quarter of 2012 due to price cuts, generic competition and lacklustre sales to European countries battling to reduce healthcare costs.

The UK pharma company posted sales down 8 per cent to £6.5bn ($10.51bn) - or 5 per cent at constant exchange rates - with sales in Europe down 9 per cent thanks largely to austerity measures introduced by national governments.

The bulk of that decline (7 per cent) came from reduced prices, said GSK chief executive Andrew Witty on a conference call, while 2 per cent was from reduced volumes.

The company's chief financial officer Simon Dingemans said the situation in Europe was unexpected as "not only have further austerity measures been implemented in the quarter, but we've also seen a further expansion of parallel trade and generic substitution measures".

Sir Andrew also said he had no expectations of a recovery in Europe in the coming months, and the company is currently working out "how best to respond" to that situation. He would not be drawn on the possibility of further cost-cutting in Europe, but noted that "nothing is ruled in or out" and further guidance would be forthcoming in the fourth-quarter results.

The performance in Europe was offset by GSK's business in the US, which managed 2 per cent underlying growth  thanks in part to a good showing by asthma and chronic obstructive pulmonary disease (COPD) drug Advair (salmeterol plus fluticasone) which advanced 5 per cent to £1.22bn.

Emerging markets such as Asia-Pacific also helped the top line, with revenues up 9 per cent in India and 15 per cent in China.

Overall, pharmaceutical sales fell 4 per cent while GSK's vaccines business was down 14 per cent, although the latter suffered from comparison with the second half of 2011 which included a major delivery of the Cervarix human papillomavirus (HPV) vaccine in the US.

Among GSK's key pharma products the Avodart (dutasteride) franchise grew 9 per cent to £199m, thanks to new launches in Japan and Europe, while specialty lines also performed well, with Votrient (pazopanib) for kidney cancer  up 70 per cent to £49m and Promacta (eltrombopag) for blood disorders up 59 per cent to £35m in the quarter.

The company's systemic lupus erythematosus (SLE) drug Benlysta (belimumab) posted sales of £20m, continuing the lacklustre sales momentum seen before GSK acquired it as part of its purchase of Human Genome Sciences earlier this year.

Looking ahead, Sir Andrew highlighted the strength of GSK's pipeline, saying "we've never had a portfolio like this at GSK, and I'm not sure too many other companies have ever had it either".

"If all goes well, over the next three years, we think we will launch 15 new products from this advanced portfolio," he said.

1st November 2012

From: Sales

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