Half Yearly Report

Group performance

Group turnover by division, geographic region and segment

Turnover - Q2 2014

Total Group turnover for Q2 2014 declined 4% to £5,561 million.  Pharmaceuticals and Vaccines turnover fell by 4%.  Pharmaceuticals turnover declined 6% as growth in Emerging Markets, Europe and ViiV Healthcare was more than offset by lower sales in the US and Japan, and a decline in Established Products sales.  Worldwide Vaccines turnover grew 5%, as a strong performance in Emerging Markets was partly offset by lower reported sales in the US, Europe and Japan.  Consumer Healthcare turnover was £1,022 million in the quarter, down 4%.

In the US, Pharmaceuticals and Vaccines turnover declined 10% to £1,193 million, with Pharmaceuticals down 11% and Vaccines down 2%.  Pharmaceutical sales in the quarter were impacted by continued price and contracting pressures across the US market which particularly affected respiratory sales, down 14% in the quarter.  Excluding wholesaler and retailer stocking patterns, estimated underlying respiratory sales were down 17%, with price down 6% and volume down 11%.  Sales of Advair were down 19%, with an estimated underlying reduction of 21% (14% volume decline and a 7% negative impact of price and mix).

Oncology products in the US contributed strongly to the quarter, with sales up 42% to £119 million, benefiting from strong performances from Votrient and Promacta, and the recent launches of Tafinlar and Mekinist.  Benlysta sales grew 17% to £37 million.  Generic competition in the US continued to impact sales of Dermatology products, which declined 63% to £11 million, and generic competition to Mepron, which began in March 2014, resulted in a 86% decline in sales to £3 million.  The 2% decrease in Vaccines sales primarily resulted from sales of hepatitis vaccines, down 16% to £56 million, largely as a result of stocking patterns in the quarter, partly offset by sales of Boostrix, up 12% to £43 million.

Europe Pharmaceuticals and Vaccines turnover was flat at £1,019 million.  Pharmaceutical sales grew 2% to £780 million, primarily reflecting strong growth in Oncology, up 39% to £106 million, led by Votrient and Promacta, together with the initial stages of the Tafinlar launch.  Sales of the Avodart franchise increased 9% to £70 million.  Seretide declined 4% to £348 million, primarily due to price.  Sales of Prolia declined 88% as a result of the termination in Europe of the commercialisation agreement with Amgen, which was announced in early April 2014.  Vaccines sales fell 5%, reflecting the phasing of shipments of Infanrix, Priorix and Rotarix, now expected in H2 2014, partly offset by higher sales of Boostrix during the quarter, which benefitted in part from a strong performance in Germany.

Emerging Markets Pharmaceuticals and Vaccines turnover increased 11% to £822 million, with Pharmaceuticals up 5% and Vaccines up 26%, reflecting the phasing of tender sales of Synflorix and Rotarix.  The ongoing investigation in China adversely impacted Emerging Markets Pharmaceuticals and Vaccines sales growth by an estimated four percentage points.  In China, sales excluding Established Products were down 20% to £62 million (including Established Products, down 25% to £129 million).  Elsewhere there were strong contributions from Brazil, up 49% to £116 million, and Middle East/North Africa/CIS, up 8% to £211 million.  In Emerging Markets Pharmaceuticals, there was continued growth from Oncology products, up 47% and Augmentin, up 11%.  Seretide sales were down 4%, in part due to the phasing of shipments, but also the impact of generic copies in some markets.

Japan Pharmaceuticals and Vaccines turnover fell 7% to £187 million, with Pharmaceuticals sales declining 7% and Vaccines sales declining by 9%.  The performance in Pharmaceuticals reflected lower sales of Adoair, down 26%, and Avodart, down 14%, primarily due to destocking following local tax changes but also increasing competitive pressures.  Sales of Flolan declined 40% to £8 million, but there was a strong performance from Xyzal, which grew 58% to £26 million in the quarter.  The decline in Vaccines sales reflected the impact on Cervarix of the continued suspension of the recommendation for use of HPV vaccines, partly offset by higher sales of Rotarix.

ViiV Healthcare turnover grew 13% to £352 million as the growth generated by Epzicom, Selzentry and the recent launch of Tivicay more than offset the impact of generic competition to older ViiV Healthcare products, including Combivir and Trizivir.

Established Products turnover fell 24% to £696 million, principally reflecting generic competition to Lovaza in the US, down 81%, which commenced in April, and continuing generic competition to a number of products across the portfolio, including Seroxat/Paxil, down 29%, Valtrex, down 24%, and Zeffix, down 20%.

Consumer Healthcare turnover was £1,022 million in the quarter, down 4% compared with Q2 2013.  Growth in Rest of World markets of 3% was offset by lower sales in Europe, down 10%, and US, down 11%.  All three regions were impacted by a number of supply issues.

Total Group turnover for Q2 2014 compared with Q2 2013 including divestments completed in 2013 was down 8%, with Pharmaceuticals and Vaccines down 6% and Consumer Healthcare down 14%.

Turnover - H1 2014

Total Group turnover for H1 2014 declined 3% to £11,174 million.  Pharmaceuticals and Vaccines turnover fell by 4%.  Pharmaceuticals turnover declined 5% as growth in Emerging Markets, Europe, Japan and ViiV Healthcare was more than offset by lower sales in the US and in Established Products.  Worldwide Vaccines turnover grew 4%, as performances in the US and Emerging Markets were partly offset by lower reported sales in Europe and Japan.  Consumer Healthcare turnover was £2,149 million in the six months, down 2% compared with H1 2013.

In the US, Pharmaceuticals and Vaccines turnover declined 10% to £2,323 million, with Pharmaceuticals down 13% and Vaccines up 9%.  Pharmaceutical sales were impacted by continued price and contracting pressures across the US market which particularly affected respiratory sales, down 17%.  Excluding wholesaler and retailer stocking patterns, estimated underlying respiratory sales were down 14% with price, after net favourable adjustments to accruals for returns and rebates, down 2% and volume down 12%.  Sales of Advair were down 24%, with an estimated underlying decline of 21% (14% decline in volume and a 7% decline from price and mix).

Oncology products in the US contributed strongly to the first six months, with sales up 36% to £227 million, benefiting from strong performances from Votrient and Promacta, and the recent launches of Tafinlar and Mekinist.  Benlysta sales grew 24% to £71 million.  Generic competition in the US continued to impact sales of Dermatology products, which declined 60% to £24 million and Mepron, which declined 48% to £20 million.  The 9% increase in Vaccines sales primarily resulted from sales of Infanrix/Pediarix, up 35% to £137 million, which benefited from a favourable comparison with H1 2013 which was impacted by CDC stockpile movements.  Sales of hepatitis vaccines were down 15% to £100 million, while Boostrix sales were up 26% to £73 million.

Europe Pharmaceuticals and Vaccines turnover grew 1% to £2,043 million.  Pharmaceutical sales grew 2% to £1,564 million, primarily reflecting strong growth in Oncology, up 31% to £201 million, led by Votrient and Promacta, together with the initial stages of the Tafinlar launch.  Sales of the Avodart franchise increased 9% to £141 million.  Seretide declined 4% to £700 million, primarily due to price.  Vaccines sales fell 1%, reflecting the phasing of shipments of Infanrix, Priorix and Rotarix, now expected in H2 2014, partly offset by higher sales of Boostrix and Rotarix.

Emerging Markets Pharmaceuticals and Vaccines turnover increased 7% to £1,513 million, with Pharmaceuticals up 6% and Vaccines up 10%, primarily reflecting the phasing of tender sales of Boostrix and Rotarix.  The ongoing investigation in China adversely impacted Emerging Markets Pharmaceuticals and Vaccines sales growth by an estimated three percentage points.  In China, sales excluding Established Products were down 17% to £125 million (including Established Products, down 22% to £267 million).  Elsewhere there were strong contributions from Brazil, up 34% to £174 million, the remainder of Latin America, up 11% to £280 million, and Africa/Developing Countries, up 20% to £131 million.  Excluding China, there was continued growth from Respiratory products, up 3%, Oncology, up 40%, Augmentin, up 4%, and the Avodart franchise, up 24%.

Japan Pharmaceuticals and Vaccines turnover grew 5% to £472 million, with Pharmaceuticals sales increasing 6% and Vaccines sales declining by 27%.  Pharmaceuticals sales benefited from the government stockpiling of Relenza at the start of the year, with sales more than doubling, and also strong growth in Avodart, up 17%.  This growth was partially offset by lower sales in the Respiratory portfolio, which were affected by a weaker allergy season and increased competitive pressures.  The decline in Vaccines sales reflected the impact on Cervarix of the continued suspension of the recommendation for use of HPV vaccines, partly offset by higher sales of Rotarix.

ViiV Healthcare turnover grew 9% to £663 million as the growth generated by Epzicom and the recent launch of Tivicay more than offset the impact of generic competition to older ViiV Healthcare products, including Combivir and Trizivir.

Established Products turnover fell 18% to £1,510 million, reflecting generic competition to Lovaza in the US, down 54%, which commenced in April, and continuing generic competition to a number of products across the portfolio, including Seroxat/Paxil, down 22%, Valtrex, down 24%, and Zeffix, down 18%.

Consumer Healthcare turnover was £2,149 million in H1 2014, down 2% compared with H1 2013.  Growth in Rest of World markets of 4% was offset by lower sales in Europe, down 7%, and the US, down 10%, as all three regions were impacted by a number of supply issues.

Total Group turnover for H1 2014 compared with H1 2013 including divestments completed in 2013 was down 7%, with Pharmaceuticals and Vaccines down 5% and Consumer Healthcare down 11%.

Divisional performance

Pharmaceuticals

Respiratory

Q2 2014 (£1,559 million; down 8%)

Respiratory sales in the quarter declined 8% to £1,559 million.  Seretide/Advair sales were down 12% to £1,095 million, Flixotide/Flovent sales decreased 6% to £172 million and Ventolin sales grew 8% to £155 million.  Xyzal sales, almost exclusively made in Japan, grew 42% to £30 million.

In the US, Respiratory sales fell 14%, primarily reflecting the continued price and contracting pressures, including for new products, which affected the ICS/LABA combination market, where Advair and Breo Ellipta compete, and also the LABA/LAMA combination market, where Anoro Ellipta has recently been introduced.  Underlying US respiratory sales, excluding wholesaler and retailer stocking patterns, were down an estimated 17%, with price down 6% and volume down 11%.  Advair sales were down 19% to £528 million, with an estimated underlying reduction of 21% for the quarter (14% volume decline and a 7% negative impact of price and mix).  Flovent sales were down 6% to £106 million, compared with an estimated underlying reduction of 5% for the quarter (4% volume decrease and a 1% negative impact of price and mix) and Ventolin grew 14% to £73 million.  The estimated underlying growth of Ventolin was 3%, with the reported sales benefiting from net favourable adjustments to accruals for returns and rebates.  The two new products for COPD, Breo Ellipta launched in Q4 2013, and Anoro Ellipta launched in Q2 2014, sold £5 million each.

European Respiratory sales were down 3%, primarily reflecting increasing competition.  Seretide sales declined 4% to £348 million, primarily due to price.  Relvar Ellipta, approved in Europe for both COPD and asthma, was launched in Q1 2014, and recorded sales of £3 million in the quarter.

Respiratory sales in Emerging Markets fell 3%, but sales excluding China were flat.  Seretide fell 4% to £98 million, in part due to the phasing of shipments and the impact of generic copies in some markets.  Sales growth of Ventolin, up 7% to £40 million, and Veramyst, up 18% to £18 million, was offset by declines in the rest of the Respiratory portfolio.

In Japan, Respiratory sales overall fell 4% to £95 million despite strong growth in Xyzal, up 58% to £26 million.  This growth was more than offset by lower sales for Adoair, down 26% to £45 million, in part due to destocking following local tax changes but also increasing competitive pressures.  Relvar Ellipta recorded sales of £2 million in the quarter, but were limited by the "Ryotan" restrictions, which limit prescriptions to two weeks' supply in the first year after launch of a new product.

H1 2014 (£3,113 million; down 9%)

Respiratory sales in H1 2014 declined 9% to £3,113 million.  Seretide/Advair sales were down 14% to £2,134 million, Flixotide/Flovent sales decreased 4% to £365 million and Ventolin sales grew 11% to £328 million.  Xyzal sales, almost exclusively made in Japan, grew 4% to £68 million.

In the US, Respiratory sales fell 17%, primarily reflecting the continued price and contracting pressures in the market.  Underlying US respiratory sales, excluding wholesaler and retailer stocking patterns, were down an estimated 14%, with price, after net favourable adjustments to accruals for returns and rebates, down 2% and volume down 12%.

US Advair sales were down 24% to £983 million, with an estimated underlying reduction of 21% for the six months (14% volume decline and a 7% negative impact of price and mix).  Flovent sales were down 2% to £229 million, with an estimated underlying reduction of 6% (7% volume decrease and a 1% positive impact of price and mix).  Ventolin sales grew 22% to £165 million, but the estimated underlying decline was 3%.  Breo Ellipta recorded sales of £6 million and Anoro Ellipta sold £5 million in H1 2014.

European Respiratory sales were down 3%, primarily reflecting increasing competition.  Seretide sales declined 4% to £700 million, primarily due to price reductions.  Relvar Ellipta recorded sales of £5 million in the six months.

Respiratory sales in Emerging Markets  were flat, but grew 3% excluding China.  Seretide was flat at £195 million (down 1% excluding China).  Sales growth of Ventolin, up 7% to £78 million, and Veramyst, up 21% to £35 million, was offset by declines in the rest of the Respiratory portfolio.

In Japan, Respiratory sales overall fell 4% to £243 million, as sales growth of Xyzal, up 4% to £60 million, and the launch of Relvar Ellipta, which sold £3 million in the six months, were more than offset by lower sales for the rest of the Respiratory portfolio.  Sales of Adoair were flat.

Oncology

Q2 2014 (£295 million; up 39%)

Oncology sales in the quarter grew 39% to £295 million.  Votrient sales grew 41% to £101 million and Promacta sales grew 36% to £55 million.  Arzerra sales fell 18% to £12 million and Tykerb/Tyverb sales fell 6% to £45 million.  Generic competition to both Hycamtin and Argatroban was more than offset by new launches as Tafinlar and Mekinist recorded sales of £33 million and £16 million, respectively.

In the US, Oncology grew 42% to £119 million.  Votrient sales grew 28% to £42 million and sales of Promacta grew 21% to £21 million.  Mekinist and Tafinlar sales were £15 million and £14 million, respectively.  Both were launched in late Q2 2013.

In Europe, Oncology grew 39% to £106 million, led by sales of Votrient, which increased by 37% to £39 million in the period.  Promacta grew 46% to £18 million and sales of Tafinlar, which was launched in Q3 2013, were £16 million.  In Emerging Markets and Japan, Oncology sales in the quarter grew 47% to £44 million and 6% to £15 million, respectively.

H1 2014 (£556 million; up 33%)

Oncology sales in the six months grew 33% to £556 million.  Votrient sales grew 36% to £188 million and Promacta sales grew 33% to £103 million.  Arzerra sales fell 21% to £28 million and Tykerb/Tyverb sales fell 10% to £87 million.  Generic competition to both Hycamtin and Argatroban was more than offset by new launches as Tafinlar and Mekinist recorded sales of £55 million and £29 million, respectively.

In the US, Oncology grew 36% to £227 million.  Votrient sales grew 23% to £79 million and sales of Promacta grew 20% to £39 million.  Mekinist and Tafinlar sales were £28 million and £25 million, respectively.

In Europe, Oncology grew 31% to £201 million, led by sales of Votrient, which increased by 39% to £76 million in the period.  Promacta grew 46% to £34 million and sales of Tafinlar, were £26 million.  In Emerging Market and Japan, Oncology sales in H1 2014 grew 42% to £80 million and 10% to £29 million, respectively.

Cardiovascular, metabolic and urology

Q2 2014 (£233 million; down 7%)

Sales in the category fell 7% to £233 million.  The Avodart franchise fell 2% to £199 million, with 9% growth in sales of Duodart/Jalyn and a 5% decline in sales of Avodart, and Levitra fell 33% to £24 million in the quarter.   Sales of Prolia decreased 25% to £7 million, in part due to the agreement with Amgen to terminate the joint commercialisation in a number of European markets, Mexico and Russia, which was announced in April.

On a regional basis, sales in the US were down 20% to £90 million, Europe down 5% to £71 million and Japan, down 14% to £22 million, but sales in Emerging Markets were up 11% to £35 million.

H1 2014 (£474 million; down 2%)

Sales in the category fell 2% to £474 million.  The Avodart franchise grew 2% to £398 million, with 15% growth in sales of Duodart/Jalyn and a 2% decline in sales of Avodart.  Levitra fell 30% to £48 million in the period. Sales of Prolia grew 18% to £23 million, prior to the termination in Europe of the joint commercialisation agreement with Amgen.

On a regional basis, sales in the US, down 19% to £173 million, were partly offset by Europe, up 4% to £152 million, Emerging Markets, up 20% to £68 million, and Japan, up 17% to £53 million.

Immuno-inflammation

Q2 2014 (£42 million; up 21%)

Immuno-inflammation sales grew 21% to £42 million.  Benlysta turnover in the quarter was £41 million, up 21%.  In the US, Benlysta sales were £37 million, up 17%.

H1 2014 (£88 million; up 42%)

Immuno-inflammation sales grew 42% to £88 million.  Benlysta turnover in the six months was £79 million, up 28%.  In the US, Benlysta sales were £71 million, up 24%.

Other pharmaceuticals

Q2 2014 (£596 million; up 2%)

Other therapy areas grew 2% to £596 million, and included £36 million of Theravance milestone income received in the quarter (Q2 2013: £19 million).  This growth was partially offset by generic competition to Dermatology products, which primarily affected sales of Soriatane in the US, and by a decline in sales of Mepron, down 68% to £7 million, following the start of generic competition in March 2014.

H1 2014 (£1,197 million; up 4%)

Other therapy areas grew 4% to £1,197 million, principally reflecting government stockpiling of Relenza in Japan, which more than doubled to £45 million and included Theravance milestone income of £45 million (H1 2013: £19 million).  This growth was partially offset by generic competition to Dermatology products, which primarily affected sales of Soriatane in the US, and by a decline in sales of Mepron.

ViiV Healthcare (HIV)

Q2 2014 (£352 million; up 13%)

ViiV Healthcare sales increased 13%, with the US up 38%, Emerging Markets down 22%, Japan up 8%, and Europe flat.  Epzicom/Kivexa sales increased 6% to £188 million, Selzentry sales increased 14% to £38 million and Tivicay, which was launched in the US in Q3 2013 and in Europe in Q1 2014, recorded sales of £64 million.  This growth was partially offset by declines in the mature portfolio, mainly driven by generic competition to both Combivir, down 33% to £16 million, and Trizivir, down 65% to £7 million.

H1 2014 (£663 million; up 9%)

ViiV Healthcare sales increased 9%, with the US up 20%, Emerging Markets down 6%, Japan up 17%, and Europe down 1%.  Epzicom/Kivexa sales increased 9% to £365 million, Selzentry sales increased 4% to £71 million and Tivicay recorded sales of £95 million.  This growth was partially offset by declines in the mature portfolio, mainly driven by generic competition to both Combivir, down 42% to £32 million, and Trizivir, down 60% to £18 million.

Established Products

Q2 2014 (£696 million; down 24%)

Established Products turnover fell 24% to £696 million with declines in all regions.  Sales in the US were down 40% to £183 million, Europe was down 10% to £151 million, Emerging Markets was down 14% to £243 million and Japan was down 21% to £106 million.

Generic competition to Lovaza in the US, down 81% to £27 million, Seroxat/Paxil, down 29% to £49 million, Valtrex, down 24% to £37 million, and Zeffix, down 20% to £40 million, all contributed to the decline in the category.

H1 2014 (£1,510 million; down 18%)

Established Products turnover fell 18% to £1,510 million with declines in all regions.  Sales in the US were down 29% to £439 million, Europe was down 12% to £318 million, Emerging Markets was down 11% to £507 million and Japan was down 12% to £222 million.

Generic competition to Lovaza down 54% to £132 million, Seroxat/Paxil, down 22% to £104 million, Valtrex, down 24% to £74 million, and Zeffix, down 18% to £85 million, all contributed to the decline in the category.

Vaccines