GlaxoSmithKline plc (GSK) has suffered major setback during the third quarter ended September 2014 on account of lower sales of Advair. Its net profit declined sharply by 61.9 per cent to £385 million from £1,010 million in the corresponding period of last year due to lower sales in US and Europe. Its turnover declined by 13.3 per cent to £5,646 million from £6,510 million. Its operating profit went down by 55.2 per cent to £703 million from £1,569 million.

GSK's pharmaceutical and vaccines sales declined by 10 per cent to £4,575 million from £5,084 million as its sales in US declined by 16.5 per cent to £1,271 million from £1,522 million and that in Europe declined by 7.3 per cent to £972 million from £1,049 million. Its sales in Japan also moved down by 5.7 per cent to £198 million from £210 million. Sales in emerging markets were slightly higher by 2.3 per cent to £799 million. GSK's sales of seretide/Advair declined sharply by 13 per cent to £976 million as the same in US declined by 25 per cent to £441 million. Vaccines' sales remained flat at £922 million. The sales of oncology division went up by 35 per cent to £311 million

Sir Andrew Witty, CEO, said, “This quarter we have continued to make strategic choices to create value from assets held in the Group and to respond to the pressures we are facing in our operating environment, in particular the changed dynamics we have seen in the US respiratory market. The impact of formulary and contract changes we have seen this year to Advair have been greater than we anticipated and directly affected our US sales performance in the quarter.”

“Our other key priority this quarter has been to work towards completion of our proposed 3-part transaction with Novartis, and we continue to expect closure in the first half of 2015, subject to consultation and necessary approvals. This is a clear catalyst to fundamentally re-shape GSK, providing new balance and options for the Group to increase value for shareholders across its three core businesses of pharmaceuticals, vaccines and consumer healthcare,” Witty added.

GSK is planning IPO for its ViiV Healthcare division which focused on development of treatments for HIV and created with Pfizer and Shionogi as equity partners. The company also intend to refocus its global pharmaceuticals business and cost base following the divestment of its oncology products and the changed dynamics it now face in the US respiratory market. The new restructuring programme will rescale commercial operations, global support functions and relevant R&D/manufacturing across pharmaceuticals and is expected to deliver cost savings incremental to the existing announced programmes. It is expected that these measures will save around £1 billion of new annual cost over the next 3 years.

For the first nine months ended September 2014, GSK's turnover declined by 14.2 per cent to £16,820 million from £19,599 million in the similar period of last year and its net profit moved down by 42.2 per cent to £1,806 million from £3,123 million. Its sales in US sales declined by 16.5 per cent to £3,594 million from £4,303 million and that in Europe went down by 3.6 per cent to £3,015 million from £3,126 million. R&D expenditure declined by 13.4 per cent to £2,471 million from £2,853 million.