GSK Foresees Return To Emerging Markets Growth

The second quarter saw continued declines in GSK's China and wider emerging markets business, but CEO Andrew Witty expects a return to growth in these sectors over the remainder of the year.

GlaxoSmithKline PLC saw continued slippage in its emerging markets and China businesses in the second quarter, which it attributed mainly to “reshaping” and product divestments, but the company's CEO foresees things recovering around the end of the year.

The UK-based group's total emerging market pharma sales slumped by 9% in the quarter, dragged down by a 14% fall in China, due largely to business changes and price reductions in this market.

CEO Andrew Witty said during a results Q&A session that "EMs [emerging markets] are actually improving underlying but we have had a number of disposals this year, [on top of] the Venezuela [economic] situation and the continued reshaping of China."

While GSK did not break out individual sales figures, first-half pharma sales in emerging markets fell 7% (-5% pro forma) at constant currencies, while the China business plunged by 21% in the period, hit by lower respiratory sector sales and wholesaler de-stocking of hepatitis vaccines.

Last December, GSK returned rights to Amgen Inc. in 48 countries, including China, to three products - Prolia/Xgeva (both denosumab), and Vectibix (panitumumab) - which contributed to the declining emerging markets/China sales.

Excluding China, things were somewhat brighter, with first-half emerging market sales falling by a relatively lower 3% reported and 2% pro forma.

Witty said he now expects to see "much better" underlying growth for EMs and China through the remainder of 2016, "getting us into the mid-single digit type of territory as we move into next year."

Questioned on whether the company was actually making money in emerging markets, the CEO stressed that these are "absolutely still a profitable business for us." The company is now "coming through back into something where it will be a reported contributor to growth in a way that it has not been in the last year or so."

Certainly the picture this year has not been good, with first quarter reported emerging market pharma sales falling 4% and those in China slumping 28%, but judging from the second quarter at least the contraction in China seems to be slowing (Also see "GSK’s Witty: China Moving Rapidly To ‘No Growth’ Status" - Scrip, 2 May, 2016.).

"We have just seen Cervarix approved in China and Viread put onto the pricing list…we are already seeing some stabilization," Witty commented.

Cervarix, a vaccine that protects against human papillomavirus and cervical cancer, was recently granted Chinese regulatory clearance after years of delays (Also see "China Approves First HPV Vaccine But Can GSK Secure Its Lead?" - Pink Sheet, 19 Jul, 2016.).

Viread (tenofovir; licensed from Gilead Sciences Inc.) for hepatitis B meanwhile has been included in the country's national reimbursement list, but will suffer a parallel 67% price cut (Also see "Deep China Price Cuts Reveal Complex Considerations" - Scrip, 23 May, 2016.).

These moves and the divestments in China mean there has been a "structural reshaping of the company rather than anything else" in this key market, Witty commented. Underlying growth in China is improving "quite quickly" helped by the disposal or shaping of "about a third of [the business] what we had before."

Japan Fall

In Japan, second quarter pharma sales were down 3% to £335m ($442m) due to a 5% price cut sustained in the industry-wide biennial April price revision, and fell by 7% (-5% pro forma) to £662m in the six months.

For further coverage of GSK's results, see (Also see "Strong 2Q And Fresh UK Investment Signal Few Brexit Blues at GSK" - Scrip, 27 Jul, 2016.).

From the editors of PharmAsia News.