April 25, 2018 / 11:30 AM / in a year

Currency and pricing squeeze GSK as new shingles vaccine shines

LONDON (Reuters) - GlaxoSmithKline’s (GSK.L) new shingles vaccine Shingrix exceeded expectations in the first quarter, but the drugmaker’s sales and earnings fell 2 percent, held back by a stronger pound and more pricing pressure in respiratory medicine.

FILE PHOTO: The GlaxoSmithKline (GSK) logo is seen on top of GSK Asia House in Singapore, March 21, 2018. REUTERS/Loriene Perera

The vaccine, a rival to Merck & Co’s (MRK.N) older and less effective Zostavax, is a top priority for Chief Executive Emma Walmsley as she strives to improve GSK’s drugs portfolio.

Shingrix sales totaled 110 million pounds ($154 million)during its first full quarter on the market, beating analysts’ consensus forecast of around 35 million. GSK expects Shingrix to become its biggest single vaccine over time.

Walmsley told reporters the Shingrix number was “very encouraging”, although she noted that some of the revenue represented supplying necessary stock into the market.

Elsewhere, the going remains tough for GSK’s business, with the full-year earnings hit from currency moves now seen at 8 percent, against 6 percent previously.

And GSK expects more sales erosion for its aging lung inhaler Advair in the key U.S. market - even before generic rivals are launched - due to increased pricing and competition.

GSK shares fell 3 percent following the results, with investors unnerved by the worsening respiratory pricing trends.

GSK’s adjusted quarterly earnings per share (EPS) were 24.6 pence on sales of 7.22 billion pounds. Analysts, on average, had forecast 24.25 pence and 7.24 billion pounds respectively, according to Thomson Reuters data.

For the full year, the company reiterated its view that EPS would be flat to down 3 percent in constant currencies, if generic copies of Advair hit the U.S market by mid-year. Without generics, earnings would be up 4 to 7 percent.

The timing of generic copies of its blockbuster lung drug arriving in the United States is a big uncertainty in 2018, after copycats failed to launch in 2017 because U.S. regulators knocked back applications.

This year, a substitutable copy of Advair is very possible, with Mylan (MYL.O) due to hear in June whether the U.S. Food and Drug Administration will approve its version.

Despite this threat, and looming competition from a new Gilead Sciences (GILD.O) HIV drug, GSK sees growth strengthening over the next few years, helped by the roll-out of newer medicines.

Walmsley, who took over a year ago, is focusing on rebuilding GSK’s drug pipeline by overhauling research and appointing heavyweight outsiders, such as veteran Roche (ROG.S) scientist Hal Barron.

Barron, in turn, earlier this month hired a new head of pharma deal-making, signaling GSK’s intention to boost its drug pipeline through acquisitions and licensing agreements.

The main focus of acquisitions will be early-stage assets that can add to the pipeline of experimental drugs, Walmsley said, adding she was not interested in entering a $64 billion bidding war with Takeda Pharmaceutical (4502.T) for Shire SHP.L.

“We have ruled out any interest in Shire,” she said.

Last month, GSK agreed to buy Novartis (NOVN.S) out of their consumer healthcare joint venture for $13 billion, but Walmsley has made clear the drugs pipeline will have first call on future investment resources.

Editing by Alexandra Hudson and Mark Potter

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