07.01.10
#4 - GlaxoSmithKline
980 Great West Rd. Brentford
Middlesex TW8 9GS (UK)
Tel: (44) 020 8047 5000
Fax: (44) 020 8047 7807
www.gsk.com
Headcount | 99,913 | |
Year Established | 2002 | |
Pharma Revenues | $36,746 | -3%/+15% |
Total Revenues | $44,422 | -2%/+16% |
Net Income | $8,877 | +2%/+20% |
R&D Budget | $6,181 | -6%/+113% |
Revenues converted at average exchange rate / based on reported currency (GBP)
2009 Top Selling Drugs | |||
Drug | Indication | Sales | (+/-%) |
Seretide/Advair | asthma, COPD | $7,794 | +2% |
Valtrex | herpes | $2,026 | -9% |
Flovent | respiratory | $1,214 | -3% |
Relenza | influenza | $1,127 | +966% |
Augmentin | antibacterial | $1,044 | -4% |
Hepatitis vaccine | hepatitis | $1,041 | -16% |
Infanrix | pediatric vaccine | $1,016 | -20% |
Kivexa | HIV/AIDS | $855 | +4% |
Avodart | enlarging prostate | $830 | +12% |
Paxil | CNS | $819 | -14% |
Lamictal | epilepsy, bipolar disorder | $783 | -54% |
Ventolin | asthma | $747 | +19% |
Avandia | diabetes | $723 | -24% |
Lovaza | cholesterol management | $705 | +31% |
Combivir | HIV/AIDS | $666 | -17% |
Account for 58% of total pharma sales, same as in 2008.
PROFILE
We’re only up to company #4, and it already sounds like a broken record. But here it is: Glaxo-SmithKline is trying to adjust to the new pharma realities and a massive patent losses and less-than-expected R&D success by increasing its consumer operations, expanding into emerging markets, building its vaccines and biologics franchises, and selling branded generics.
In its 1Q10 financial announcement, GSK noted that its traditional sales model — described as “white pills/ western markets,” which would make a tremendous name for an indie rock band — now comprises only 27% of sales. And how were those sales? Thanks to a 16% drop in the average value of GSK’s reporting currency, the Great Britain Pound (GBP), GSK tumbled out of our top three. At 2008’s exchange rates, the company would have posted pharma revenues of $43.5 billion, a sum that would’ve squeaked it past Sanofi-Aventis for the #2 slot. But if we knew how to guess exchange rates, we’d all be George Soros.
The Lowe Down
GlaxoSmithKline has been making some pretty severe cuts recently. Not that this necessarily stands out in the current environment, but the big deals they’ve been making at the same time send a clear message to the people working there. I’m not sure if it’s the message that management wants to send, naturally, but here’s roughly how it goes: We Can Do Better Than You, And Cheaper, Too. Not a good recipe for morale, is it? Of all the deals, it’s probably the Sirtris one that remains GSK’s poster child. It’s going to be fascinating to see if something good comes out of that one eventually — and if it does, if it had anything to do with the reasons the deal was made in the first place. One of the drivers of all this trouble is the continuing uproar over Avandia. If you want to know what this business is like, there’s a perfect example. Ten years ago, PPAR drugs were all the rage (not least at Glaxo). And what do we have to show for all of it? A stack of failed clinical programs, a couple of launched drugs, and a blizzard of lawsuits. Sheesh. —Derek Lowe |
This is one of those instances where the exchange rate really wreaks havoc with the basic results. For instance, Seretide/Advair posted 20% growth in GBP, but that comes out to a mere 2% boost after conversion. However, Lamictal really did get devastated by generic competition, falling 46% in GBP and 54% in dollars, for a billion-dollar drop.
And GSK sure has gotten used to billion-dollar lurches. Relenza added a huge sum to GSK’s bottom line, thanks to H1N1 pandemic panic, while Avandia/Avanda-met, which topped $3 billion in sales in 2006, continued to decline because of safety fears, posting a “mere” $723 million in 2009 revenues.
In February 2010, the New York Times cited an internal — but not unanimous — FDA report that contends Avandia causes more than 500 heart attacks and 300 cases of heart failure every month (and that these could be prevented by switching patients to Takeda’s Actos). This was followed by a staff report from the U.S. Senate Finance Committee, accusing GSK of knowingly covering up safety concerns for several years before Dr. Steve Nissen’s meta-analysis of Avandia trials first raised concerns in 2007.
Acquisition News
Target: Laboratorios Phoenix Price: $253 million Announced: June 2010 What they said: “By acquiring Phoenix, we will rapidly expand our presence in the fast growing Argentine market. In addition, Phoenix’s broad portfolio and rich pipeline of branded generics will enable us to bring more medicines of value to patients in Argentina.” —Abbas Hussain, President Emerging Markets, GSK Target: Laboratoire Pharmaceutique Algerien Price: $45 million Announced: December 2009 Target: NovaMin Technology Price: $87 million Announced: December 2009 |
GSK strenuously objected to those complaints. The company hopes that its new mega-trial, TIDE, will end the debate over Avandia’s safety. However, the trial is scheduled to run until 2020, and Avandia’s U.S. patent expires in 2012, so there’s no chance it’ll bring about a commercial resurgence for the product. (The company hopes to have interim data to show the FDA in 2014.)
R&D: Moving Out
GSK is trying to break out of its traditional mold by restructuring its R&D model. Last year, we covered the company’s finer-grained CEDD/DPU model for discovery and development, which GSK hopes will help reach its goal of around 30 “assets” in late-stage development at all times. In February 2010, the company announced that it was expanding its ongoing $5.6 billion restructuring plan with a new $1.4 billion series of cutbacks that will include R&D. Half of the $750 million annual savings from this round will come from R&D. The company plans to cut development in the depression and pain areas of neuroscience, focusing research on Alzheimer’s, MS and Parkinson’s disease.
In a financial release, chief executive officer Andrew Witty pointed out that 30% of GSK’s drug discovery research is external, generally via option-based deals. The company plans to increase the number of those deals. Paul Trennery, head of Scinovo, GSK’s preclinical development “broker,” told us in our exclusive interview (Contract Pharma January/February 2010), “There’s an expectation that each CEDD should work toward having a proportion of their discovery activity via external partnerships. Some are already doing much, while others are working toward it. . . . Over our whole portfolio, we think that, by 2015, about half of our pipeline will come from external innovator companies.”
On the Verge of ViiV
Last year, we noted that GSK and Pfizer were planning to establish a joint venture in HIV treatments. In November 2009, they put that plan into effect, with GSK buying Pfizer's HIV drugs in exchange for a 15% share of the new company, which was named Viiv Healthcare. (As a fan of The Young Ones, I'd have gone with Vyvyan.) Viiv has its own R&D managers, and can choose projects from Pfizer or GSK's pipelines and/or in-license compounds from other companies. At its launch, Viiv had five compounds in Phase II. With projected sales of its marketed products around $2.4 billion, Viiv is about half the size of Gilead, the 800-lb. gorilla of the AIDS market. For 1Q10, Viiv posted $581 million in sales, a drop of 7% from how its products performed for their previous owners. Every GSK drug in the JV was down, led by Combivir, which fell 23% in 1Q sales. The addition of Selzentry and Viracept to the Viiv venture helped keep numbers from falling too far. So, not an auspicious beginning, but ViiV is geared for the long term (and perhaps a spin-off, sometime after the ramifications of U.S. healthcare reform and reimbursement issues are settled). |
GSK filed a BLA for one those externally licensed drugs, Benlysta, a MAb developed by Human Genome Sciences, in June 2010, and may make history with the first new treatment for systemic lupus erythematosus (SLE) in 50 years. Given existing treatments’ failure in SLE trials, Benlysta could become a billion-dollar drug for GSK and HGS.
Drawing a New Map
The company pulled off several deals to move into new geographic regions in the past 12 months, expanding on the previous year’s initiatives:
- July 2009: Acquired BMS’ branded generics business in Lebanon, Jordan, Syria, Libya and Yemen for $23, following 2008 acquisition of BMS’ portfolio in Egypt and Pakistan.
- August 2009: Expands partnership with Fiocruz to develop and manufacture vaccines in Brazil, starting with Synflorix.
- October 2009: Forms JV with Walvax for pediatric vaccines, starting with Priorix, for use in China.
- December 2009: Expanded its deal with Aspen Pharmacare to cover more of sub-Saharan Africa.
- May 2010: Bought 9.9% of South Korea’s top pharma/OTC company, Dong-A, and will co-promote products in that country.
- June 2010: Bought a presence in Argentina via Laboratorios Phoenix (See Acquisition News).
In July 2009, GSK signed a deal with Amgen in July 2009 to help commercialize Prolia in Europe, Australia, New Zealand and Mexico, leveraging its expertise and salesforce in osteoporosis. GSK will also register and sell Prolia in emerging markets where Amgen has no presence, like China, Brazil, India and South Korea.
No National Champions Here!
In April 2010, GSK received conditional approval to market Arzerra in the EU. A treatment for chronic lymphocytic leukemia meant to compete with Rituxan, Arzerra was licensed from Genmab for a potential payout of $2.1 billion (plus royalties). "Conditional" meant that GSK would have to provide more data to get the approval renewed each year. (It received accelerated approval in the U.s. in October 2009.) I hope GSK wasn't expecting preferential treatment in its home country, because in June 2010, the UK's National Institute for Health and Clinical Excellence (NICE) made an initial recommendation against publicly-funded (National Health Service) use of Arzerra, due to lack of data and, well, value. A second round of examinations is pending, but it's not a good sign that NICE rejected Arzerra even though GSK was offering a patient access discount to the NHS, according to a Dow Jones report. |
For all of its marketing expansion into emerging markets, GSK has also been praised for trying to improve health in regions that are too poor to afford most new treatments. GSK handily scored the top rank in the Access to Medicine Index, beating out other major pharmas.
As I noted at the top, GSK is sounding the same notes as other top pharmas. It’s too late for “everything to go right” and enable the company to weather the 2013 loss of Seretide/Advair smoothly. GSK will need to execute outside of white pills/western markets — and it’ll need the GBP to bounce back — to avoid becoming an also-ran.
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