The relentless pace of change Andrew Witty is directing at GlaxoSmithKline is continuing.
In discussing GSK’s most recent earnings report Wednesday in London, Witty disclosed two more major changes as he shifts the company away from traditional markets, drug development practices and its current product suite.
Witty said that GSK has decided to sell off two nutritional drinks – if the right price can be had for them.
Plus, GSK’s current crop of products are going to be managed by what he calls a “distinct team” which he says is designed on “driving increased efficiencies and value.”
That decision immediately triggered speculation the brands might be sold. Among the products is Zantac, an antacid.
The drugs to be included in the Global Established Products portfolio have combined annual sales of about $4.6 billion.
“It’s a sensible move for us to ensure we’re maximizing value in the short run,” Witty said on a call with reporters. “Of course, it opens up optionality for us in the future.”
Glaxo’s decision echoes a move by Pfizer Inc., the world’s largest drugmaker, to consider splitting its branded and generic-drug businesses into separate units. That too prompted speculation that New York-based Pfizer would split into separate companies.
These moves come after Witty disclosed in February more than $1 billion in cuts would be sped up. These are primarily aimed at Europe, not the U.S. where GSK maintains its North American headquarters in RTP.
Product Selloff, Established Portfolio
“In April 2013, we completed the strategic review of our nutritional drinks brands Lucozade and Ribena and concluded that the tremendous growth potential of these iconic brands, particularly outside the ‘core’ Western markets, could be better leveraged by companies with existing category presence and infrastructure in these regions,” Witty said.
“As a result, we have decided to pursue the divestment of these brands, subject to the realization of appropriate value for GSK shareholders.”
If sold, the brands could generate as much as $4 billion for Glaxo, according to analysts at Deutsche Bank AG.
The product efficiency effort is titled “Global Established Products” portfolio.
“During 2013 we also plan to create a Global Established Products portfolio of our pharmaceutical tail products, which is expected to include over 50 brands with annual sales of around £3 billion (estimated $4.5 billion),” Witty explained. “The portfolio will be co-ordinated by a distinct team focused on driving increased efficiencies and value across this portfolio, including in manufacturing, and better coordination of tendering and procurement opportunities. Sales of these products will be reported separately from 1 January 2014.”
Increased Investments in Startups, Growth in U.S.
Just this week, GSK made another major move in its product development strategy shift of relying on more technology developed outside the company. Glaxo is investing alongside a venture capital fund that could lead to $475 million worth of investments in as many as 10 startups in and around San Diego, Calif.
Earlier this year, GSK also committed $50 million to another biotech startup fund.
Other moves include more focus on sales in emerging markets even as GSK continues to deal with legal problems surrounding the diabetes drug Avandia and a new price fixing allegation in the U.K.
In the earnings report, Witty did note improving sales in the U.S. where overall sales climbed 4 percent. He labeled the growth “further signs of improved performance.”
GSK also is ramping up its U.S. product pipeline with several recent advances.
The company is counting on regulatory decisions on six drugs as it seeks to boost sales 1 percent this year and earnings per share by 3 percent to 4 percent.
GSK also has filed for U.S. approval of the lung drugs Anoro and Breo Ellipta, dolutegravir for HIV, dabrafenib and trametinib for skin cancer, and albiglutide for Type 2 diabetes.
Advisers to the U.S. Food and Drug Administration recommended last week that Breo Ellipta be approved to treat chronic obstructive pulmonary disease, also known as smoker’s cough. Sales of the drug may reach more than $1 billion in 2020, according to Tim Anderson, an analyst at Sanford C. Bernstein & Co. The FDA’s decision on Breo is scheduled for May 12.
Dolutegravir will get a priority review by the FDA, with a decision expected Aug. 17, as it aims to challenge Gilead Sciences Inc., maker of the world’s best-selling AIDS medicine.
Results from late-stage studies of experimental treatments darapladib for heart disease and MAGE-A3, a cancer treatment, also will be released this year.
Europe, however, remains a sore spot.
“European Pharmaceuticals and Vaccines sales fell 3%. This is an improvement on performance in recent quarters, largely reflecting the fact that some government price cuts implemented in 2011 and early 2012 have now annualized,” Witty said. “Nevertheless, the commercial environment in Europe remains challenging and unpredictable, and we continue to be cautious about the outlook here.”
First-quarter profit did fall 6 percent after GSK lost revenue from several products it divested. Earnings excluding some items fell to $2.95 billion, or 31 cents a share, from a year earlier.
That report still beat a slightly lower average of 14 analysts’ estimates compiled by Bloomberg.
Sales fell 3 percent to $10.01 billion after Glaxo sold 17 over-the-counter products to Prestige Brand Holdings Inc. and after Astellas Pharma Inc. took over the promotion of the overactive bladder treatment VESIcare.
[GSK ARCHIVE: Check out more than a decade of GSK stories as reported in WRAL Tech Wire.]
(Bloomberg news contributed to this report.)