GSK breathes easy on Advair generic delay, earnings boosted by 3%

By Ben Hargreaves

- Last updated on GMT

(Image: Getty/Winvic)
(Image: Getty/Winvic)

Related tags Gsk Advair Mylan Hikma Ventura

Though generic competition to Advair is still on the horizon, GSK’s Q2 financials revealed the importance of its rivals’ delays.

It had looked likely that GlaxoSmithKline’s (GSK) blockbuster Advair would be facing competition from numerous angles until first Hikma and partner, Ventura​, and then Mylan​, were turned away by the US Food and Drug Administration (FDA).

Advair (fluticasone propionate/salmeterol) is a combination treatment for the management of asthma and chronic obstructive pulmonary disease, which is a core product in GSK’s Respiratory portfolio.

The upshot for GSK was revealed in its second quarter financials, which revealed that if no generic competition enters the US market this year, the company would achieve adjusted earnings per share (EPS) growth of 7 to 10% – a 3% boost over the alternative scenario of a competitor entering the market, which GSK noted would see adjusted EPS drop to 4 to 7%.

In a statement​, Emma Walmsley, CEO of GSK, said: “We are today upgrading our guidance for CER [Constant Exchange Rate] growth in Adjusted EPS for 2018. This reflects increased sales expectations for Shingrix, the positive effect of the completed Consumer Healthcare buyout as well as the delay of a potential generic version of Advair in the US, partly offset by the continuing pricing pressures in Respiratory.”

As mentioned by Walmsley, sales still suffered regardless of the lack of generic competition, with sales down to £260m ($343m) in Q2 – down from £474m in the previous year. Sales in the US market were noted to be down by 40% AER (Annual Equivalent Rate) due to an 8% drop in volume of sales and a 27% “negative impact by price.”

Fiona Cincotta, senior market analyst at City Index, still saw the positives in the financials in a comment provided upon the release: “The introduction of generic competition to Advair, while taking longer than expected, still looms as a major hit to earnings next year. But strength in vaccines and cash flow opportunities presented by the Novartis deal look like providing an increasingly effective buffer that will ultimately help keep the dividend intact.”

R&D play with 23andMe

One of the major announcements released alongside the financials was the announcement of a $300m deal with 23andMe​.

The aim of the deal is for GSK to leverage the genetics company’s stores of data on its customers DNA to potentially discover new therapies. 23andMe has a history in the space, after launching its own drug discovery therapeutics group​ under the guidance of Genentech vet, Richard Scheller.

The drug discovery deal will run for four years.

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