GSK: We are ready, and the business is focused
- Emma Walmsley, in her first quarterly earnings call as CEO of GlaxoSmithKline, has delivered "another quarter of continued progress," with sales up 5% to £7.4 billion ($9.5 billion), driven by pharmaceuticals growth of 4% and vaccines growth of 16%. (All earnings reported on a constant exchange rate basis.)
- New product sales were up £1.4 billion ($1.8 billion), on track to deliver £6 billion ($7.7 billion) sales in 2018. Total respiratory sales were up 5%. The biggest seller, Advair (fluticasone and salmeterol), had sales of £752 million ($964 million) in the quarter, down 12% overall. The greatest fall was in Europe, down 17%, where it already faces generic competition.
- After a handful of approvals hoped for in 2017, including the shingles vaccine Shingrix, and GSK's triple combination for chronic obstructive pulmonary disease (COPD), the next wave of approvals isn't expected until 2020, putting pressure on innovation through in house research and acquisition.
Emma Walmsley, the first woman to head up a big pharma, opened her first earnings call on an upbeat note: "It is a real privilege to be leading this great company. GlaxoSmithKline has made good progress on the recovery of financial performance. It will keep a clear focus on competitive performance as it navigates a challenging regulatory and political environment."
Walmsley added: "We see both logic and benefit of being a three-group company, especially in the light of the volatility of pharmaceuticals. The consumer health and vaccines provide more certainty in the cash-flow, and we will maintain this as long as all three groups continue competitively. In the near term we will focus on execution and cement confidence in our delivery."
Walmsley and her team have spent time discussing the GSK company culture and what they want to keep and change. While recognizing that there is much value, one of the things that she noted was an opportunity for more focus on individual accountability.
Until the expected wave of approvals comes on line in 2020, Walmsley will focus on innovation and developing the pharma pipeline, saying that this was the biggest priority and promising investment, with more detail made available in the second quarter earnings call in July 2017. This will include looking at internal and external resources for the early stage pipeline.
"There is a necessity to look at the pipeline," said Patrick Vallance, president of pharmaceuticals R&D. "We have carried out some cleaning up of the pipeline, including looking at legacy products, and there is more to do so that we can concentrate on backing the winners. The alignment between the R&D and commercial departments will be important."
The biggest impact of 2017 could be the U.S. generic substitution of Advair (fluticasone and salmeterol). While Mylan's generic version was rejected by the FDA in March, a decision is expected on another version from Hikma Pharmaceuticals and Vectura in May. The availability of a generic will affect 2017's bottom line, with an adjusted EPS growth of 5-7%, based on an expected decline in 2017 U.S. Advair sales of 15-20%, if it was non-substitutable. The decline would be steeper with a substitutable generic, leading to full year 2017 U.S. Advair sales of around £1 billion ($1.36 billion).
While Walmsley would not comment on specifics about the company's response, including whether there were plans for an authorized generic, she said that "We have been preparing for this for some time. We are ready, and the business is focused."
- GlaxoSmithKline Statement
Follow Suzanne Elvidge on Twitter