GlaxoSmithKline Plc. (GSK), the UK based second largest pharmaceutical company in the world, has suffered minor setback during the second quarter ended June 2008 due to generic competition in the USA and lower Avandia sales. The company's net profit declined by two per cent to £1,307 million from £1,355 million in the similar period of last year. Its turnover increased by 3.5 per cent to £5,874 million from £5,674 million.

Its pharmaceutical sales increased by 3.4 per cent to £4,923 million from £4,759 million. In the US, turnover fell by 8 per cent to £2,129 million due to generic competition and a reduction in Avandia sales. Excluding these products US turnover grew by 13 per cent. In Europe, turnover was up by 4 per cent to £1,598 million, with improving sales growth from vaccines and new products. Sales in emerging markets were up 15 per cent to £563 million and in Asia Pacific sales were level at £ 464 million.

Andrew Witty, CEO, said "We are responding to the challenges faced by GSK this year and are seeing good progress, particularly in terms of pipeline output and product approvals. In broader terms, it is clear that GSK can, and must, do more to improve shareholder value. I believe our new strategic priorities will drive the changes GSK needs to make and enable us to realise the opportunities we see in the future healthcare environment."

Sales of Seretide/Advair, for asthma and COPD, were £964 million, up by 6 per cent. In the US, sales grew by 2 per cent to £473 million. The asthma controller market in the USA has declined slightly year over year while the use of short acting inhalers such as albuterol has increased.

Vaccines sales grew by 34 per cent to £577 million driven by strong US sales of hepatitis vaccines. Also contributing to sales growth this quarter were sales of GSK's recently introduced pre-pandemic flu vaccine. Sales of Lamictal grew by 18 per cent to £323 million in the quarter and sales of Valtrex grew by 19 per cent to £277 million. Global Avandia sales declined by 46 per cent in the quarter to £194 million, with the largest decline in the US market with sales down 54 per cent to £104 million. Sales of Zofran also declined by 49 per cent to £31 million.


For the first six months ended June 2008, GSK's net profit declined by 8.6 per cent to £2,639 million from £2,888 million in the corresponding period of last year. Its sales improved by 2.6 per cent to £11,560 million from $ 11,266 million. R&D expenditure during the first half increased to £1582 million from £1,515 million. Total pharmaceutical turnover for the first half declined by 3 per cent to £9.7 billion. Its turnover in US declined by 9 per cent to £4.3 billion.

"GSK will seek to generate future sales growth through supplementing strength in the core small-molecule pharmaceuticals business, with new investments in fast growing areas such as vaccines and consumer healthcare and new growth areas such as biopharmaceuticals," said Witty. "At the same time, we are actively seeking to unlock the geographic potential of our different businesses, particularly in emerging economies."

Commenting on GSK's vaccines and consumer healthcare businesses, Witty said: "These businesses offer significant growth opportunities to GSK through new products and geographic expansion. Moreover, with increasing global trends to preventative healthcare and self medication, GSK can be a global leader in meeting the converging needs of customers."

GSK has a substantial opportunity to expand its vaccines business in Emerging Markets and Asia Pacific. Economic improvements are driving increased use of advanced vaccines and Witty stated that investments in capacity and regulatory expertise in these countries was an 'immediate priority' for the company.