GSK defies detractors again as new products amp up Q3 sales beat

For the third straight quarter, GlaxoSmithKline CEO Andrew Witty is sticking it to his critics.

The British drugmaker--which has doubled down on low-margin businesses, shied away from areas subject to pricing pressure and repeatedly promised a triumphant comeback for its respiratory business--turned in solid results once again.

Revenues of £7.54 billion came in close to £300 million ahead of analyst expectations. EPS of 32 pence also topped forecasts, which tallied 29.6 pence.

The sources of that revenue were as important as the total, however, and mark a feat that many other drugmakers can't boast. Witty said £1 out of every £4 Glaxo books in sales is now generated by a product launched in the last three or four years, a group that includes respiratory newcomers Breo and Anoro, as well as HIV standout Tivicay.

“I don't know how many other companies that you cover can say that 25% of their sales come from products” that new, Witty told analysts on the company's Q3 earnings call.

And the way he sees it, that stat is a “proof point” that you can launch a product at a “reasonable price vis-a-vis other products and generate significant economic return.” That’s a strategy Glaxo has turned to recently in order to dodge the impact of the new “tremendous market forces at work” in the U.S.--a.k.a. the kind of pricing pressure that’s sent Advair into a freefall over the last several quarters.

Leading the way on Q3 growth were the company’s flu vaccines--one of the traditionally low-margin profits Witty has staked GSK's future on. That franchise made “substantial market share gains” on its way to a £325 million quarter, GSK said. Aged asthma and COPD giant Advair also benefitted from a U.S. rebate adjustment, though as Witty explained on the Q3 conference call, similar adjustmenta hurt fellow respiratory products--such as Ventolin--making “the net-net of all of this ... irrelevant.”

As for the company’s strategy, though, that’s something that’ll be determined by incoming CEO and former consumer chief Emma Walmsley after Witty leaves his post next March.

She’ll lay out her plans in 2017, Witty said on the call, and between now and then, “she's doing all the work ... to really take the time to do deep dives on various aspects of the business, in particularly the parts of the business that she hasn't personally run up until this point.”

Meanwhile, while things may be looking up for the pharma giant, Witty isn’t ready to call a victory--or start thinking about his legacy. It’s “way too early” for that, he said, noting that his focus is on making sure “we deliver a great year-end for the company.”

by Carly Helfand | Oct 26, 2016


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