GlaxoSmithKline announced Wednesday that fourth-quarter profit dropped to 864 million pounds ($1.4 billion), from 1.3 billion pounds ($2 billion) in the year-ago period, as negative pricing pressure in Europe continued to weigh on results. Overall sales in the three-month period slipped 3 percent to 6.8 billion pounds ($10.6 billion), missing analyst estimates of 6.9 billion pounds ($10.8 billion).
CEO Andrew Witty noted that due to the "sustained shift" in the European reimbursement and pricing environment, the company plans to further restructure its pharmaceuticals business in the region to "reduce costs, improve efficiencies and reallocate resources to support identified growth opportunities." GlaxoSmithKline indicated that along with other measures to streamline manufacturing and R&D, the restructuring will lead to annual savings of at least 1 billion pounds ($1.6 billion) by 2016 and cost 1.5 billion pounds ($2.3 billion) in associated charges.
The drugmaker didn't immediately detail how it planned to achieve the cost savings and Witty declined to comment on whether it would lead to job cuts in the region. However, people familiar with the matter suggested that resources could shift to emerging markets, with overall staff numbers at the company remaining steady.
For the quarter, sales from pharmaceuticals and vaccines were flat at 5.6 billion pounds ($8.8 billion), dropping 2 percent for the full year to 21.3 billion pounds ($33.3 billion). GlaxoSmithKline noted that three-monthly and annual revenue in the US both declined 2 percent to 1.8 billion pounds ($2.8 billion) and 7 billion pounds ($11 billion), respectively, due to patent expirations and the discontinuation of some products. In Europe, quarterly sales fell 5 percent year-over-year to 1.3 billion pounds ($2 billion), with revenue for the 12-month period decreasing 7 percent to 5 billion pounds ($7.8 billion). The company noted that negative pricing in Europe adversely impacted growth by approximately 6 percentage points in 2012.
Meanwhile, sales in emerging markets jumped 16 percent in the fourth quarter to 1.3 billion pounds ($2 billion), rising 10 percent for the full year to 4.7 billion pounds ($7.4 billion). GlaxoSmithKline said the annual result was boosted by strong growth in Latin America, up 11 percent to 1.3 billion pounds ($2 billion), China, 17 percent higher at 759 million pounds ($1.2 billion), and India, where sales climbed 10 percent to 304 million pounds ($476 million). Witty added that "total sales in emerging markets now account for 26 percent of our business."
For specific products, three-month sales of Seretide/Advair declined 1 percent to 1.3 billion pounds ($2 billion), with revenue from the product rising by the same percentage for 2012 to 5 billion pounds ($7.8 billion). In the quarter, sales of Infanrix/Pediarix jumped 34 percent versus the year-ago period to 235 million pounds ($368 million), with GlaxoSmithKline noting that growth in the US and emerging markets offset a small decline in Europe. Annual sales of the vaccines climbed 17 percent to 775 million pounds ($1.2 billion). In addition, quarterly revenue from Avodart rose 4 percent to 208 million pounds ($326 million), and was 7 percent higher for the full year at 790 million pounds ($1.2 billion), while three-month sales of Flovent dropped 10 percent to 206 million pounds ($322 million), slipping 4 percent annually to 779 million pounds ($1.2 billion).
GlaxoSmithKline noted that in the fourth quarter, sales of drugs launched since 2008 reached 408 million pounds ($639 million), growing 49 percent year-over-year, while revenue from the products increased 34 percent for the full year to 1.4 billion pounds ($2.2 billion). Overall sales in 2012 dropped 3 percent to 26.4 billion pounds ($40.5 billion), while profit for the year reached 4.7 billion pounds ($7.4 billion), down from 5.5 billion pounds ($8.6 billion) in 2011.
For the current year, the company said it expects sale growth of around 1 percent, with earnings increasing between 3 percent and 4 percent. "With increasing pipeline sales contribution from the end of 2013, we remain confident that we can drive improvement in the core operating margin over the medium term," Witty remarked. The executive said that "in terms of our acquisition search, we have a very low appetite," adding that with several drugs in late-stage testing or under regulatory review, "it’s all about the GSK assets at the moment."
GlaxoSmithKline said that it expects Phase III data on 14 projects in 2013 and 2014, including nine new drugs and vaccines. The drugmaker is also awaiting regulatory decisions on six drugs, including the lung treatments Anoro (umeclidinium bromide/vilanterol) and Breo (vilanterol/fluticasone), dolutegravir for HIV, dabrafenib and trametinib for melanoma, and albiglutide for type 2 diabetes. According to Deutsche Bank analysts, the FDA will probably make a decision on dabrafenib and trametinib this quarter, followed by Breo in May.
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