Profits From a Pandemic: A Swine Flu Windfall for GlaxoSmithKline?
British drugmaker GlaxoSmithKline has orders for its swine flu vaccine from 16 countries and is in talks with 50 more.
Work on the swine flu vaccination could reap huge profits for pharmaceutical company GlaxoSmithKline.
GSK also announced it expects to increase annual production of its inhalable anti-viral flu treatment Relenza threefold, to 190 million doses, by yearend. Relenza sales for the three months ended June 30 were $99 million, up from just $5 million in the second quarter of 2008. Since the beginning of 2006, GSK has invested $2.5 billion to put in place the technology and capacity needed to meet demand. "Short of putting beds in the labs, we are throwing just about every resource we have into this," Witty says.
The Competition Heats Up
Witty reckons continued demand for GSK's flu drug and vaccine will likely boost sales in the second half of this year. GSK is one of several companies, including Novartis, Sanofi-Aventis, and Baxter International, racing to develop a swine flu vaccine.
While Witty says he is confident that GSK will meet its commitments, the company's total production capacity is still unknown. That's because the current strain of the swine flu virus is yielding less of the active ingredient or antigen needed to produce the vaccine than expected. (Because each flu virus varies, different strains produce varying levels of antigens.) Novartis also has conceded that the virus it's growing for its swine flu vaccine is producing a lower-than-expected yield. But Witty says based on current production levels, GSK should still be able to meet its commitments to governments around the world by early 2010.
Generics Hurt US Sales
Still, even the boost in sales of GSK's flu treatment and vaccine were not enough to offset the rapid slowdown in US prescription drug sales due to competition from generic drugs. In the three months ended June 30, GSK's sales rose 15 percent, to $11 billion, on the back of the sterling's weakness against major currencies such as the dollar. In constant currency terms, sales fell by 2 percent mainly due to the performance of the company's US pharmaceuticals business, where sales plummeted by 15 percent, to $3.8 billion, as former top sellers such as epilepsy treatment Lamictal faced generic competition. Net profits surged by 12 percent, to $2.5 billion.
The results, says Sanford C. Bernstein pharmaceuticals analyst Timothy Anderson, were slightly better than expected in large part thanks to the weakening of the British pound against the dollar. Witty acknowledged "there was still a lot more work to do" but claimed the company was "making progress in the right direction."
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