Jeanne Whalen
Wall Street Journal
04/49/2010
Sales of the H1N1 swine-flu vaccine continued to buoy GlaxoSmithKline PLC’s earnings in the first quarter, helping to boost net profit by 19%, though Chief Executive Andrew Witty said a milder-than-expected pandemic has prompted some countries to try to reduce orders.
He said Glaxo is trying to be as flexible as possible. It has allowed some countries, including Germany and the U.K., to cut their vaccine orders and pay less. In other cases, it is sending countries H5N1 vaccine, which protects against avian flu, instead of H1N1 vaccine. While avian flu isn’t currently a widespread problem, it continues to circulate, and some countries are maintaining vaccine stockpiles.
“Our goal is to come to solutions which work for both sides,” Mr. Witty told journalists on a conference call. He said he hoped countries would remember that Glaxo scrambled to produce as much H1N1 vaccine as possible when countries were first clamoring for doses.
“While there may be moments where people want to rebalance in their favour, you’ve got to look at all of the things that happened early on in this process, where the company delivered tremendously against extremely high expectations,” he said.
Low demand for the shots has left many countries with large unused stockpiles of H1N1 vaccine. Some countries continue to offer the shots, but few people are seeking them out.
Glaxo sold £698 million ($1.06 billion) of H1N1 vaccine in the first quarter—less than the roughly £840 million it sold in the fourth quarter of last year. Mr. Witty said he still expects total pandemic-vaccine sales this year to equal last year’s level of £883 million.
Pandemic-flu vaccine helped total first-quarter sales rise by about 9% to £7.36 billion from £6.77 billion a year earlier. Net profit rose 19% to £1.34 billion from £1.13 billion.
Glaxo’s prescription-drug sales in the U.S. fell 1% at constant exchange rates, to £1.9 billion, hurt by competition from low-cost generic pills. Prescription-drug sales grew 16% in Europe and 43% in emerging markets. Mr. Witty said Glaxo and other companies could suffer from European efforts to cut large fiscal deficits. In Europe, state health systems pay for most drugs. “The notion of aggressive strategies to fix fiscal deficits must bring with it some impact in the real world, whether you’re a supplier of drugs or anything else,” Mr. Witty said.
At Glaxo’s consumer health-care business, which sells over-the-counter medicines, toothpaste and drinks, sales grew 9% at constant exchange rates to £1.2 billion. Mr. Witty credited strong sales of Sensodyne toothpaste, smoking-cessation products and Horlicks, a flavoured hot drink.
Mr. Witty said Glaxo increased its provision for potential legal liabilities by £210 million in the first quarter to a total of £2.3 billion. He said that reflects progress Glaxo is making toward settling a number of cases or investigations, though he declined to specify which. One federal investigation in the U.S. is examining whether Glaxo used illegal tactics to market drugs between 1997 and 2004. Glaxo has disclosed that the government has examined whether the company promoted the drugs for uses for which they weren’t approved, an illegal practice known as off-label marketing.