GSK sales fall short as pain in Europe continues
GlaxoSmithKline sales fell a bigger-than-expected eight per cent in the third quarter, hurt by continued pressure on drug prices in austerity-hit Europe and lower demand for some vaccines.
GSK, like its rivals, has suffered a string of patent expiries in recent years and is struggling to grow sales, even though it has come through the so-called “patent cliff” earlier than others.
It was the fourth consecutive quarter in which Britain’s biggest drug-maker missed sales and earnings expectations.
European prices fell seven per cent, after an unprecedented eight per cent fall in the second quarter, and chief executive Andrew Witty said he was now reviewing operations in the region. Plans for reshaping the business may come with full-year results early next year.
Witty told reporters he saw no reprieve in Europe “in the next quarter or two” and warned governments the industry could not sustain such poor returns forever.
“It is not reasonable for governments to believe that they can continue to make these sorts of price reductions and delay the introduction of novel medicines without that creating unintended consequences,” he said.
“It will erode the attractiveness of Europe for the entire industry.”
In one unnamed country, GSK was now selling medicines for 50 per cent less than in 1996, after years of cumulative price cuts.
The tough conditions in Europe have blown off course GSK’s hopes for a return to sales growth this year, although the company’s growing business in emerging markets and its large consumer healthcare operation are both doing well.
It also has an extensive pipeline of new drugs in development.
Until July, GSK had been predicting a return to sales growth this year. It revised its 2012 sales outlook down to flat at mid-year and reiterated this forecast yesterday, adding the caveat that this excluded any further deterioration in Europe.