3rd Quarter Results

Group performance

Group turnover by division, geographic region and segment

Turnover - Q3 2014

Total Group turnover for Q3 2014 declined 3% to £5,646 million.  Pharmaceuticals and Vaccines turnover fell by 3%.  Pharmaceuticals turnover declined 4% as growth in Emerging Markets, Japan and ViiV Healthcare was more than offset by lower sales in the US and Europe and a decline in Established Products sales.  Worldwide Vaccines turnover was flat, as a strong performance in Emerging Markets was offset by lower reported sales in the US and some smaller markets.  Consumer Healthcare turnover was £1,071 million in the quarter, down 3%.

In the US, Pharmaceuticals and Vaccines turnover declined 10% to £1,271 million, with Pharmaceuticals down 12% and Vaccines down 3%.  Pharmaceutical sales in the quarter were impacted by continued price and contracting pressures affecting respiratory sales, down 18% in the quarter (7% volume decline and a 11% negative impact of price and mix).  Sales of Advair were down 25% (10% volume decline and a 15% negative impact of price and mix).

Oncology products in the US contributed strongly to the quarter, with sales up 44% to £132 million, benefiting from strong performances from Votrient and Promacta, and the recent launches of Tafinlar and Mekinist.  Benlysta sales grew 10% to £40 million, after the impact of adverse RAR true-ups.  Generic competition in the US continued to affect sales of Dermatology products, which declined 68% to £12 million.  The 3% decrease in Vaccines sales resulted primarily from Infanrix/Pediarix, down 10% to £84 million, due in part to the broader return of a competitor vaccine that encountered supply issues in 2013, and sales of hepatitis vaccines which were down 10% to £67 million, impacted by supply constraints.

Europe Pharmaceuticals and Vaccines turnover was down 2% to £972 million.  Pharmaceutical sales fell 3% to £713 million, despite strong growth in Oncology and the Avodart franchise, which increased 10% to £70 million.  Oncology sales were up 26% to £110 million, led by Votrient, Promacta and the newly launched Tafinlar.  Seretide declined 5% to £314 million, primarily reflecting ongoing pricing pressure.  Vaccines sales were flat, as a decline in Infanrix sales was offset by higher sales of Boostrix during the quarter, particularly in Germany.

Emerging Markets Pharmaceuticals and Vaccines turnover increased 12% to £799 million, with Pharmaceuticals up 12% and Vaccines up 13%, reflecting strong tender sales of Synflorix and Boostrix.  There were strong contributions from Brazil, up 30% to £97 million, and the rest of Latin America, up 12% to £157 million.  Sales in China were up 65% to £69 million as the effects of the government investigation annualised.  In Emerging Markets Pharmaceuticals, Seretide sales were up 20%, largely due to increased sales in China, and there was continued growth from Oncology products, up 33%.

Japan Pharmaceuticals and Vaccines turnover grew 6% to £198 million, with Pharmaceuticals sales up 4% and Vaccines sales up 50%.  The performance in Pharmaceuticals reflected growth in Respiratory, up 3%, primarily driven by seasonal products, and Oncology products, up 19%, together with some restocking of Avodart, up 14% in the quarter.  The growth in Vaccines sales reflected a strong performance from Rotarix, up 50% to £7 million.

ViiV Healthcare turnover grew 18% to £373 million as the growth generated by Tivicay and Epzicom more than offset the impact of generic competition to older ViiV Healthcare products, including Combivir and Trizivir.  Triumeq was also launched in the quarter.

Established Products turnover fell 14% to £724 million, principally reflecting generic competition to Lovaza in the US, down 58%, which commenced in April this year, and continuing generic competition to a number of products across the portfolio, including Seroxat/Paxil, down 11% and Valtrex, down 29%.  Established Products performance in the quarter benefited from a significant improvement in China.

Consumer Healthcare turnover was £1,071 million in the quarter, down 3% compared with Q3 2013.  Growth in Rest of World markets of 1% reflected some supply interruptions and also weaker market conditions, while sales in Europe, down 5%, and the US, down 7%, were more directly affected by previously identified supply issues, despite good progress in remediation activities.

Total Group turnover for Q3 2014 compared with Q3 2013 including divestments completed in 2013 was down 6%, with Pharmaceuticals and Vaccines down 5% and Consumer Healthcare down 13%.

Turnover - 9 months 2014

Total Group turnover for the nine months to September 2014 declined 3% to £16,820 million.  Pharmaceuticals and Vaccines turnover fell by 3%.  Pharmaceuticals turnover declined 5% as growth in Emerging Markets, Japan and ViiV Healthcare was more than offset by lower sales in the US and in Established Products.  Europe was flat for the period.  Worldwide Vaccines turnover grew 3%, as positive performances in the US and Emerging Markets were partly offset by lower reported sales in Europe and Japan.  Consumer Healthcare turnover was £3,220 million in the nine months, down 2% compared with the same period in 2013.

In the US, Pharmaceuticals and Vaccines turnover declined 10% to £3,594 million, with Pharmaceuticals down 13% and Vaccines up 3%.  Pharmaceutical sales were impacted by continued price and contracting pressures affecting respiratory sales, down 17% (12% volume decline and a 5% negative impact of price and mix).  Sales of Advair were down 24% (14% decline in volume and a 10% decline from price and mix).

Oncology products in the US contributed strongly to the nine months, with sales up 39% to £359 million, benefiting from strong performances from Votrient and Promacta, and the recent launches of Tafinlar and Mekinist.  Benlysta sales grew 19% to £111 million.  Generic competition in the US continued to impact sales of Dermatology products, which declined 63% to £36 million and Mepron, which declined 56% to £27 million.  The 3% increase in Vaccines sales primarily resulted from the growth of Infanrix/Pediarix, up 13% to £221 million, and Boostrix, up 22% to £134 million, both benefiting from favourable CDC stockpile movements compared with 2013 and the absence of a competitor, particularly in the earlier part of the year.  Sales of hepatitis vaccines were down 13% to £167 million.

Europe Pharmaceuticals and Vaccines turnover was flat at £3,015 million.  Pharmaceutical sales were flat at £2,277 million, as strong growth in Oncology, the Avodart franchise, up 9% to £211 million, and the newly launched Relvar Ellipta were offset by lower sales of Seretide, down 4% to £1,014 million, primarily reflecting ongoing pricing pressure.  Oncology sales were up 29% to £311 million, led by Votrient, Promacta and the newly launched Tafinlar.  Vaccines sales fell 1%, reflecting growth in several products, including Boostrix, up 32%, offset by lower sales of both Infanrix and Priorix, due in part to the phasing of shipments.

Emerging Markets Pharmaceuticals and Vaccines turnover increased 9% to £2,312 million, with Pharmaceuticals up 8% and Vaccines up 11%, primarily reflecting strong tender sales of Boostrix, Rotarix and Synflorix.  Most markets outside Asia showed strong growth, with notable performances from Brazil, up 32% to £271 million and the rest of Latin America, up 11% to £437 million.  Sales in China grew 1% reflecting the effects of the government investigation on the first half.  There was continued growth from Respiratory products, up 4%, Oncology, up 39%, and the Avodart franchise, up 18%.

Japan Pharmaceuticals and Vaccines turnover grew 5% to £670 million, with Pharmaceuticals sales increasing 5% and Vaccines sales declining by 11%.  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 16%.  This growth was partially offset by lower sales in the Respiratory portfolio, down 2%, which were affected by a weaker allergy season at the beginning of the year 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 12% to £1,036 million as the growth generated by Tivicay and Epzicom more than offset the impact of generic competition to older ViiV Healthcare products, including Combivir and Trizivir.

Established Products turnover fell 17% to £2,234 million, reflecting generic competition to Lovaza in the US, down 55%, which commenced in April this year, and continuing generic competition to a number of products across the portfolio, including Seroxat/Paxil, down 19% and Valtrex, down 25%.

Consumer Healthcare turnover was £3,220 million in the nine months to September 2014, down 2% compared with the same period in 2013.  Growth in Rest of World markets of 3% reflected some supply interruptions and also weaker market conditions while sales in Europe, down 7%, and the US, down 9%, were more directly affected by supply issues.

Total Group turnover for nine months to September 2014 compared with the nine months to September 2013 including divestments completed in 2013 was down 7%, with Pharmaceuticals and Vaccines down 5% and Consumer Healthcare down 12%.

Divisional performance

Pharmaceuticals

Respiratory

Q3 2014 (£1,404 million; down 8%)

Respiratory sales in the quarter declined 8% to £1,404 million.  Seretide/Advair sales were down 13% to £976 million, Flixotide/Flovent sales decreased 6% to £148 million and Ventolin sales grew 16% to £156 million.  Relvar/Breo Ellipta, now launched in the US, Europe and Japan, recorded sales of £15 million in the quarter.

In the US, Respiratory sales declined 18% in the quarter (7% volume decline and a 11% negative impact of price and mix), 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.  Sales of Advair were down 25% (10% volume decline and a 15% negative impact of price and mix) and Flovent sales were down 8% to £90 million.  Ventolin sales grew 26%, including benefits from wholesaler and retailer stocking patterns and net favourable adjustments to previous accruals for returns and rebates.  Breo Ellipta, launched in Q4 2013 recorded sales of £8 million.

European Respiratory sales were down 3%, primarily reflecting increasing competition.  Seretide sales declined 5% to £314 million, primarily reflecting ongoing pricing pressure.  Relvar Ellipta, approved in Europe for both COPD and asthma and launched in Q1 2014, recorded sales of £4 million in the quarter.

Respiratory sales in Emerging Markets grew 13% benefiting, in large part, from a strong comparative performance in China, as the effects of the government investigation annualised.  Sales of Seretide, up 20% to £94 million, Ventolin, up 10% to £40 million, and Flixotide, up 25% to £14 million, all benefited from the favourable comparison in China versus Q3 2013.

In Japan, Respiratory sales overall grew 3% to £97 million with growth in Veramyst and Xyzal offsetting declines in Adoair and Flixotide.  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 the launch of a new product.

9 months 2014 (£4,517 million; down 9%)

Respiratory sales in the nine months to September 2014 declined 9% to £4,517 million.  Seretide/Advair sales were down 14% to £3,110 million, Flixotide/Flovent sales decreased 5% to £513 million and Ventolin sales grew 13% to £484 million.  Xyzal sales, almost exclusively made in Japan, grew 6% to £93 million.

In the US, Respiratory sales declined 17% (12% volume decline and a 5% negative impact of price and mix), primarily reflecting the continued price and contracting pressures in the market.  Sales of Advair were down 24% (14% decline in volume and a 10% decline from price and mix).  Flovent sales were down 4% while Ventolin sales were up 23%, with both benefiting from the impact of net favourable adjustments to previous accruals for returns and discounts.  Breo Ellipta recorded sales of £14 million and Anoro Ellipta sold £5 million in the nine months.

European Respiratory sales were down 3%, primarily reflecting increasing competition.  Seretide sales declined 4% to £1,014 million, primarily reflecting ongoing pricing pressure.  Relvar Ellipta recorded sales of £9 million in the nine months.

Respiratory sales in Emerging Markets grew 4%.  Seretide grew 5% to £289 million largely as a result of an improved performance in China.  Sales growth of Ventolin, up 8% to £118 million, and Veramyst, up 15% to £53 million, was offset by a 33% decline in Flixonase, which was largely driven by China.

In Japan, Respiratory sales fell 2% to £340 million, as sales growth of Xyzal, up 6% to £81 million, and the launch of Relvar Ellipta, which sold £5 million in the nine months, were more than offset by lower sales for the rest of the Respiratory portfolio, including Adoair, which fell 2% to £166 million, impacted by increasing competitor action.

Oncology

Q3 2014 (£311 million; up 35%)

Oncology sales in the quarter grew 35% to £311 million.  Votrient sales grew 27% to £107 million and Promacta sales grew 37% to £62 million.  Arzerra sales fell 17% to £14 million and Tykerb/Tyverb sales fell 15% to £42 million.  The newly launched products, Tafinlar and Mekinist, recorded sales of £37 million and £18 million, respectively.

In the US, Oncology grew 44% to £132 million.  Votrient sales grew 44% to £48 million and sales of Promacta grew 42% to £25 million.  Mekinist and Tafinlar sales were £18 million and £15 million, respectively.  Both were launched in late Q2 2013.

In Europe, Oncology grew 26% to £110 million.  Votrient sales increased 5% to £38 million and Promacta grew 33% to £19 million.  Sales of Tafinlar, which was launched in Q3 2013, were £20 million. 

In Emerging Markets and Japan, Oncology sales in the quarter grew 33% to £42 million and 19% to £17 million, respectively.

9 months 2014 (£867 million; up 34%)

Oncology sales in the nine months to September 2014 grew 34% to £867 million.  Votrient sales grew 33% to £295 million and Promacta sales grew 34% to £165 million.  Arzerra sales fell 20% to £42 million and Tykerb/Tyverb sales fell 11% to £129 million.  Generic competition to both Hycamtin and Argatroban was more than offset by new launches as Tafinlar and Mekinist recorded sales of £92 million and £47 million, respectively.

In the US, Oncology grew 39% to £359 million.  Votrient sales grew 30% to £127 million and sales of Promacta grew 28% to £64 million.  Mekinist and Tafinlar sales were £46 million and £40 million, respectively.

In Europe, Oncology grew 29% to £311 million, led by sales of Votrient, which increased by 25% to £114 million in the period.  Promacta grew 41% to £53 million and sales of Tafinlar, were £46 million. 

In Emerging Markets and Japan, Oncology sales in the nine months grew 39% to £122 million and 13% to £46 million, respectively.

Cardiovascular, metabolic and urology

Q3 2014 (£231 million; down 5%)

Sales in the category fell 5% to £231 million.  The Avodart franchise grew 2% to £195 million, with 24% growth in sales of Duodart/Jalyn and a 4% decline in sales of Avodart, while Levitra fell 41% to £20 million in the quarter.  Sales of Prolia decreased 31% to £8 million, largely due to the agreement with Amgen to terminate the joint commercialisation in a number of European markets, Mexico and Russia.

On a regional basis, sales in the US were down 18% to £83 million, and in Europe down 1% to £71 million, but sales in Emerging Markets were up 15% to £35 million and in Japan up 14% to £28 million.

9 months 2014 (£705 million; down 3%)

Sales in the category fell 3% to £705 million.  The Avodart franchise grew 2% to £593 million, with 18% growth in sales of Duodart/Jalyn and a 3% decline in sales of Avodart.  Levitra fell 33% to £68 million in the period.  Sales of Prolia were flat at £31 million.

On a regional basis, the decline in the US of 19% to £256 million, was partly offset by Europe, up 2% to £223 million, Emerging Markets, up 18% to £103 million, and Japan, up 16% to £81 million.

Immuno-inflammation

Q3 2014 (£65 million; up 46%)

Immuno-inflammation sales grew 46% to £65 million.  Benlysta turnover in the quarter was £45 million, up 14%.  In the US, Benlysta sales were £40 million, up 10%.

9 months 2014 (£153 million; up 43%)

Immuno-inflammation sales grew 43% to £153 million.  Benlysta turnover in the nine months was £124 million, up 23%.  In the US, Benlysta sales were £111 million, up 19%.

Other pharmaceuticals

Q3 2014 (£545 million; down 8%)

Other therapy areas fell 8% to £545 million.  This reflected generic competition to Dermatology products in the US, and a decline in sales of Mepron, down 54% to £12 million, following the start of generic competition in March 2014.

9 months 2014 (£1,742 million; flat)

Other therapy areas were flat at £1,742 million, principally reflecting government stockpiling of Relenza in Japan, which more than doubled to £41 million, and the inclusion of Theravance milestone income of £57 million (9 months 2013: £25 million).  This growth was 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)

Q3 2014 (£373 million; up 18%)

ViiV Healthcare sales increased 18%, with the US up 32%, Japan up 48%, Europe up 12% and Emerging Markets down 13%.  The ongoing roll-out of Tivicay resulted in sales of £78 million in the quarter.  Epzicom/Kivexa, which benefited from use in combination with Tivicay, increased 13% to £198 million but Selzentry sales fell 6% to £30 million.  The launch of Triumeq is well underway and it recorded sales of £9 million in the quarter.  This growth was partially offset by declines in the mature portfolio, mainly driven by generic competition to both Combivir, down 48% to £12 million, and Trizivir, down 58% to £9 million.

9 months 2014 (£1,036 million; up 12%)

ViiV Healthcare sales increased 12%, with the US up 24%, Japan up 28%, Europe up 3% and Emerging Markets down 8%.  Tivicay recorded sales of £173 million, Epzicom/Kivexa sales increased 10% to £563 million and Selzentry sales increased 1% to £101 million.  This growth was partially offset by declines in the mature portfolio, mainly driven by generic competition to both Combivir, down 44% to £44 million, and Trizivir, down 59% to £27 million.

Established Products

Q3 2014 (£724 million; down 14%)

Established Products turnover fell 14% to £724 million with declines in all regions except Emerging Markets, which benefited from a significant improvement in China in comparison with a weak Q3 2013.  Sales in the US were down 37% to £187 million, Europe was down 15% to £139 million and Japan was down 19% to £107 million, while sales in Emerging Markets were up 21% to £273 million.

Generic competition to Lovaza, down 58% to £53 million, Seroxat/Paxil, down 11% to £51 million and Valtrex, down 29% to £36 million, all contributed to the decline in the category.

9 months 2014 (£2,234 million; down 17%)

Established Products turnover fell 17% to £2,234 million with declines in all regions.  Sales in the US were down 31% to £626 million, Europe was down 13% to £457 million, Emerging Markets was down 2% to £780 million and Japan was down 14% to £329 million.

Generic competition to Lovaza, down 55% to £185 million, Seroxat/Paxil, down 19% to £155 million and Valtrex, down 25% to £110 million, all contributed to the decline in the category.

Vaccines