The GlaxoSmithKline CEO, Sir Andrew Witty, said the Chinese drug market has slowed down dramatically over the past year but insisted that the drugmaker’s own business is stabilising, as it unveiled second-quarter results that beat City expectations.
Witty also flagged up 40 new drugs and vaccines that are in mid- to late-stage development, half of which are expected to be approved by regulators or filed for approval by 2020. He highlighted a new shingles vaccine, as well as treatments for chronic lung disease, severe asthma, anaemia and heart disease, which are in development.
The turmoil in China’s stock markets in recent weeks has raised concerns over the state of the world’s second-largest economy, which has been slowing.
Witty said: “There is no doubt that we are seeing that the overall market place in China slowed quite dramatically over the last year or so. For our own business, we have seen some pretty good signs of stabilisation.”
GSK’s sales in China fell 14% in the latest quarter, but he said this reflected price reductions, which should boost sales volumes in coming months, as well as disposals of some products.
He added: “Overall, we are feeling pretty good about where we are in China. We are obviously glad to have put behind us the events of the last year or so and we feel that we have a very robust approach to how we now go forward in China, which is very much in step with what the authorities of China want to see.”
GSK has come through a damaging corruption scandal in China, for which it paid a £300m fine to the government in Beijing. It is still being investigated by the UK Serious Fraud Office and the US Department of Justice, which are both looking into allegations of bribery in China and other countries.
Witty said GSK had cleaned up its act, becoming the first and only company to commit to stopping payments to doctors to speak on its behalf. This has been implemented in China and the UK and is being rolled out globally. GSK is also the first company to stop bonus payments tied to prescriptions to sales representatives around the world.
The drugmaker reported sales of £5.9bn in the second quarter, up 7% at constant exchange rates. Core operating profit fell 3% to £1.35bn. GSK said the “standout performance” came from its new HIV drugs, Tivicay and Triumeq, which vindicated its decision in May to hold on to its HIV venture, after plans to spin it off.
Witty said the company’s research and development day in November will be a “key moment”, when it will update investors about its new medicines. The last time GSK held an R&D day was in 2003.
The drugmaker’s malaria vaccine, which the world’s first and took 30 years to develop, received the green light from European regulators last week. Witty said it could take between 12-18 months before it is rolled out in sub-Saharan Africa, as it still needs approval from the World Health Organisation and national governments. The shot will be sold on a not-for-profit basis, at a few dollars per dose.
GSK recently sold its cancer business to Novartis and bought the Swiss group’s vaccines division, while also boosting its consumer health business through a joint venture. It will take time for the business overhaul to pay off.
Ketan Patel, a senior investment analyst at EdenTree Investment Management, said: “Investors in GlaxoSmithKline will have been buoyed by the recent pipeline success, with the approval of malarial vaccine Mosquirix. However, the company has tested the patience of long-term investors over the past few years.
“The bribery scandal in China led to a large fine, declining returns on capital and faltering sales in its respiratory franchise in the US, and the impact on share price performance has been marked.”
Patel added, however, that the company has the healthiest pipeline in the global pharmaceutical sector with more than 250 products.
This article was written by Julia Kollewe, for theguardian.com on Wednesday 29th July 2015 16.03 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010