Industry Trend Analysis - Competition To GSK's Advair To Pose Challenges In 2017 - APR 2017

BMI View : While GSK reported strong Q416 sales, incoming CEO Emma Walmsley , who will replace Sir Andrew Witty in March 2017, will continue to face uncertainty with regards to the company ' s revenue stream, which is heavily determined by its core respiratory therapy area , and in particular its bestselling drug , Advair . In the event of a mid-year introduction of a substitutable generic competitor to Advair in the US, GSK has stated that it expects revenue from Advair to fall from GBP3.5bn (USD4.4bn) in 2016 to GBP1bn (USD1.3bn) in 2017. GSK has been bracing itself for the arrival of generic Advair since the expiry of its US patent in 2010, but an additional patent on the Diskus inhaler used to deliver the drug has so far kept competitors at bay.

In Q416, multinational drugmaker GlaxoSmithKline (GSK) registered sales of GBP7,586mn (USD9,488mn), equating to a 3% increase in sales in constant exchange rate (CER) terms and 21% in sterling terms. Sales of new pharmaceutical products and vaccines totalled GBP1,370mn (USD1,714mn) in the quarter - an increase of 71% in CER terms. In Q416, core EPS of GBp26.1 was up 11% in CER terms and up 45% in actual rates. The positive currency impact reflected the weakness of the sterling against the majority of the company's trading currencies relative to Q415. For the full year, GSK reported sales of GBP27,889mn (USD34,882mn), an increase of 6% in CER terms and 17% in sterling terms.

In Q416, GSK's global pharmaceuticals turnover was GBP4,575mn (USD5,722mn), up 4% in CER terms and 22% in GBP terms. The results reflect a 2% increase in respiratory product sales in CER terms - which comprised 5% growth in the US, 2% growth in international markets and a 7% decline in Europe. Despite an increase in product sales in GSK's primary therapy area (respiratory diseases), declining sales of the company's top selling respiratory product Seretide/ Advair (fluticasone propionate + salmeterol) were noted in the US (volume decline and the negative impact of price), Europe (generic competition) and international markets, resulting in a 20% decline in product sales in Q416 in CER terms. Turnover was also negatively impacted by a 6% decline in the sales of established products, including the impact of price revisions in Japan and the unwinding of wholesaler stocking in Q316, particularly in China.

An Increase In Sales
Q416: GSK Financial Snapshot
Source: GSK

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