Glaxo 1Q Profit Drops 13 %
Wed, 04/22/2009 - 5:14am
LONDON (AP) — GlaxoSmithKline, the world's second largest drug maker by revenues, posted a 13 percent drop in net profit for the first quarter on Wednesday, as strong sales in Europe and emerging markets were offset by a poor performance in its U.S. pharmaceutical business. Glaxo, which earlier this week announced it is buying American dermatology business Stiefel Laboratories Inc. in a $2.9 billion deal, said that it would continue to "re-engineer" its U.S. operations and that it expects the impact of generic competition there to be reduced in the second half of the year. The company booked net profit for the three months to March 31 of 1.13 billion pounds ($1.65 billion), down from 1.31 billion pounds a year ago. Revenue rose 19 percent to 6.77 billion pounds from 5.69 billion pounds. The company said that total pharmaceutical turnover declined 6 percent in the first quarter to 5.6 billion pounds, as the U.S. performance continued to be significantly hurt by generic competition to several mature brands. Outside the U.S., pharmaceuticals sales grew 7 percent to 3.3 billion pounds. "This first quarter reflects what was always expected to be a year of two halves for GlaxoSmithKline," CEO Andrew Witty said on a conference call, noting the year-on-year effect of U.S. competition was expected to be at its most extreme in the first half. "It is essential that we reconfigure our U.S. business to make sure we have the right resource in the right areas and an overall lower level of infrastructure costs." The company's shares dropped 1.5 percent to 1,035 pence on the London Stock Exchange. London-based Glaxo, which sells asthma treatment Advair and the Ribena range of soft drinks, said earlier this year it planned to cut jobs and costs. Glaxo has been moving to replace falling sales of older drugs facing generic competition through acquisitions and other diversifying deals to boost its businesses in emerging markets and consumer healthcare. It has said it will lose about $5 billion in sales as demand falls for treatments like its diabetes drug Avandia — which has suffered from safety concerns — its antidepressant Wellbutrin and heart medication Coreg. Along with the Stiefel purchase to beef up its presence in the dermatology market, it also unveiled plans this month to pool resources with Pfizer Inc. to create a new company to develop and sell HIV medicines. The new company being formed with Pfizer will blend Glaxo's portfolio of HIV drugs now on the market — some with patents approaching expiration — with New York-based Pfizer's more robust pipeline of drugs in development. With 11 HIV medicines already on sale, the new venture will have a 19 percent market share, ranking it No. 2 behind sales leader Gilead Sciences Inc. Other competitors in the field include heavyweights Bristol-Myers Squibb Co., Abbott Laboratories, Merck & Co. and DuPont Pharmaceuticals Co. Attempts to boost Glaxo's line-up of consumer healthcare products include the launch of its non-prescription weight-loss drug alli in pharmacies across Europe earlier this week. Glaxo believes that over-the-counter medicines are a growth opportunity at a time when sales of many prescription products are slowing.