GlaxoSmithKline sees consumer health care as a major opportunity in 2008 as its pharmaceutical division faces setbacks from increased generic competition and safety concerns surrounding the diabetes drug Avandia .

"Consumer healthcare is a strength for us right now," CEO Jean-Pierre Garnier said during a Feb. 7 earnings call on fourth quarter and year-end results. The consumer unit's 2007 revenue increased 14 percent to 3.5 billion U.K. pounds, or $6.87 billion at Feb. 7 exchange rates. Annual pharmaceutical sales declined 4 percent to $37.73 billion, the firm reported.

GSK expects generic competition and lower Avandia sales to drive a "mid-single digit percentage decline" in business performance earnings per share in 2009, the firm said.

Garnier pointed out 2007 consumer health care sales reflect the launch of OTC weight loss drug alli and the acquisition of Breathe Right and FiberChoice from CNS in December 2006. "So that number is not indicative of '08," he said.

Consumer sales for 2008 "will be down a notch, in all likelihood, because you won't have as much growth coming out of alli, although we have some," he said.

Alli has recorded $294.3 million in sales since it became available over-the-counter in the U.S. in June, the firm reports.

Sales of over-the-counter medicines were up 20 percent to $3.34 billion in 2007, with Panadol acetaminophen increasing 14 percent to $514.1 million and the CNS products contributing combined sales of $158.9 million, GSK says.

Consumer product sales, including oral care and nutritional healthcare as well as OTC drugs, were up 30 percent to $1.94 billion in the United States. European consumer sales grew 7 percent to $3.14 billion and international sales were up 10 percent to $1.83 billion for 2007, the firm reports.

Andrew Witty, who will take over the CEO position when Garnier retires in May, also noted the strength of the consumer division during the call.

"The consumer business, I think, has really demonstrated that it is a real deliverer of sales growth to the organization," he said.

"We've demonstrated as owners of that business we know what we are doing, that we can grow as fast as anybody else in the sector and we can deliver margins as high as anybody else in the sector, and that really represents a powerful engine for the organization," Witty said.

In The Switch Pipeline?

In addition to the consumer business, the firm identified its November acquisition of Reliant Pharmaceuticals as an opportunity to boost growth in its U.S. Rx drug sales portfolio, specifically citing the Liberty Corner, N.J.-based firm's prescription omega-3 acid ethyl esters product, Lovaza (¹ 'The Tan Sheet' Nov. 26, 2007, In Brief).

"I think it's a great offering and here's why: This is a product that is basically a natural product - the only omega-3 product approved by the FDA - a product with 'no warnings,'" Garnier said.

Prior to GSK's acquisition of Reliant, Lovaza contributed $308.1 million in sales for 2007, GSK said.

Morgan Stanley analysts cited Lovaza as a future switch opportunity in a report prepared for a drug industry discussion on OTC switch on Jan. 25 in New York.

Overall, GSK reported 2007 sales of $44.57 billion, down 2 percent, and operating profit of $14.89 billion, a 3 percent decline.

The firm reports 2007 consumer health care operating profit of $1.44 billion, an increase of 8 percent from 2006. For the fourth quarter, the unit's operating profit was $421.9 million, up 8 percent from the fourth quarter of 2006.

Quarterly operating profit for the prescription pharmaceutical business dropped 9 percent to $2.7 billion, before taxes, according to the firm, due in part to concerns related to Avandia.

- Jessica Lake (j.lake@elsevier.com)

GSK Consumer Unit Holds Promise In 2008 As Rx Division Faces Challenges

More from Archive

More from Pink Sheet