GSK reports weaker profit, Avandia probe

GlaxoSmithKline reported a decline in third-quarter profit, hurt by weaker sales of its controversial diabetes drug Avandia and its pandemic flu vaccines.

The British drug maker also disclosed this morning that it is responding to a subpoena from the U.S. Department of Justice and several states' Attorneys General "relating to the development and marketing of Avandia."

"These enquiries are at an early-stage, and GSK is cooperating with these offices," the company wrote in a prepared statement.

In September, GSK announced that it would stop promoting Avandia after European regulators ordered the drug pulled from the market and U.S. regulators required additional restrictions because of an increased risk of heart attacks. Avandia revenue will be minimal after this year, GSK said.

GSK also has received a subpoena from the U.S. Attorney for the Eastern District of New York "regarding sales and marketing practices for three HIV products, as well as educational programmes, grants or payments to physicians regarding any drug used to treat HIV-infected adults." GSK said it is cooperating with the investigation.

The company's earnings fell 3.5 percent to about $2 billion, after currency adjustments, GSK reported this morning.

Sales were down 2 percent to about $10.7 billion. Increases in emerging markets offset declines of 8 percent in the United States and 9 percent in Europe. Results in the U.S. were hampered by health-care reform and lower reimbursements for some of its drugs.

GSK employs about 5,000 people in the Triangle, mostly at its North American headquarters in Research Triangle Park.

“Despite the challenging environment we face, I remain confident that GSK’s outlook continues to improve,” CEO Andrew Witty said in a prepared statement.

On a conference call with analysts and reporters he said that he company is “emerging back into daylight."

Witty has been cutting costs, including thousands of jobs worldwide, to offset slowing sales. GSK also is increasing efforts to buy or develop promising new drugs to boost future revenue.

GSK will continue to seek small acquisitions to expand in vaccines, consumer health and emerging markets, Witty said. But he won't spend billions of dollars to buy another large drugmaker, saying that most large deals that are reshaping the pharmaceutical market are "value-destroying."

The company has shipped 25 million doses of its Relenza seasonal flu vaccine in the U.S. this year, up from 17.5 million doses last year.

“Everybody’s sensitivity about flu is higher,” Witty said. “We have been able to get our production schedule accelerated so we, particularly for the U.S., were able to get significant volumes earlier in the season. And one of the keys in the U.S. is to be there early.”

The company also raised its quarterly dividend 7 percent today. GSK's U.S. stock, which is down 4 percent this year, fell 50 cents to $40.42 this afternoon.

Watch a video of Witty discussing the latest results online here.