GlaxoSmithKline Plc, the U.K.’s biggest drugmaker, cut its forecast for the year, as sales of its best-selling asthma drug, Advair, continue to fall. The shares dropped the most in almost six years.
Full-year earnings per share will be similar to last year and sales are unlikely to increase, the London-based company said today in a statement. Glaxo, whose second-quarter EPS missed analysts’ estimates, in February forecast 2014 EPS growth of 4 percent to 8 percent and a sales gain of about 2 percent.
Market share for Advair fell after the drug lost patent protection and the largest U.S. pharmacy-benefits manager stopped reimbursing prescriptions. Efforts to introduce two new lung drugs, Breo and Anoro, to help replace Advair revenue have taken longer to bear fruit than the company anticipated. The marketing costs of new products also hurt profit.
“I really hoped we were at the end of being walked down on management expectations,” said James Hay, an analyst for Brewin Dolphin, which manages about 26 billion pounds ($44 billion). “It’s frustration, purely, because we keep believing management and they keep not delivering.”
Glaxo fell as much as 6.9 percent, the biggest decline since November 2008, and was down 6.1 percent at 1,460 pence at 2:25 p.m. in London. The stock has declined 7.1 percent this year including reinvested dividends, compared with a 14 percent return in the Bloomberg Europe Pharmaceutical Index.
Profit Decline
Profit excluding certain items fell to 1.41 billion pounds, or 19.1 pence a share, from 1.88 billion pounds, or 25.3 pence a share, the company said. Analysts expected 21.6 pence a share, based on the average of nine estimates compiled by Bloomberg.
Sales for the quarter fell 4 percent at constant exchange rates to 5.56 billion pounds, missing analysts’ estimate of 5.75 billion pounds. The pound reached $1.71 in the second quarter, the highest level since 2008, reducing the profit from U.S. revenue. Pharmaceutical and vaccine sales there fell 10 percent.
Advair sales declined 12 percent to 1.1 billion pounds. Generic competition for Lovaza, a heart medicine with about 607 million pounds in sales last year, “has been more substantive and began earlier than we expected,” Glaxo said.
China Probe
China began a probe last year into Glaxo’s sales practices in the country, detaining some of its employees there. In May, Chinese police handed the bribery case to prosecutors, accusing a British executive of ordering workers to illegally pay doctors, hospitals and medical associations to boost sales. Revenue in the country fell 25 percent to 129 million pounds in the second quarter.
Glaxo said it’s cooperating with Chinese officials and is conducting an internal investigation. The U.K. Serious Fraud Office has also opened a probe.
The company is selling some of its established products, which are expected to have 1 billion pounds in revenue this year. Potential purchasers include private-equity firms and mid-tier pharmaceutical companies, Witty told journalists on a conference call today. Glaxo expects to complete the sale by the end of the year.