Tough times ahead in US market for Glaxo and AZ

GlaxoSmithKline has replaced the head of its North American business unit as it struggles to maintain sales in its biggest market.

Meanwhile, AstraZeneca has also been dealt a major blow to its US business after a court invalidated a patent on its asthma drug Pulmicort Respules (budesonide), exposing more than $1 billion in brand and authorised generic sales to immediate generic competition.

For GSK, the decision to replace Deirdre Connelly as president of GSK North America Pharmaceuticals with Jack Bailey, formerly senior vice president for policy, payers and vaccines, comes after a 12 percent drop in US turnover in 2014, dragged down by its respiratory unit.

GSK has been hit particularly hard by downward pricing pressure and lower volumes for its chronic obstructive pulmonary disease (COPD) drug Advair (salmeterol and budesonide), which saw US sales decline 25 percent to $1.97 billion.

Bailey's experience in dealing with healthcare payers is considered to a key factor behind the decision, with GSK's president of global pharmaceuticals Abbas Hussein saying the new head "is credited with successfully managing a rapidly changing healthcare environment, including the implementation of healthcare reform and an increased focus on the value of medicines."

The new US president will be tasked with restoring the fortunes of GSK's respiratory franchise and driving through a recently-announced restructuring of its US R&D and commercial operations.

So far this year GSK has launched Incruse (umeclidinium) for COPD and Arnuity (fluticasone furoate) for asthma in the US, and is also waiting for FDA decisions on Advair follow-up Breo (fluticasone furoate and vilanterol) in asthma - approved last year for COPD - as well as its first-in-class interleukin-5 inhibitor mepolizumab.

It is also banking on strong growth from recently-introduced COPD combination Anoro (umeclidinium and vilanterol), which achieved sales of $17 million last year, with $11 million of the total coming in the fourth quarter.

The respiratory franchise is expected to show continued pressure this year but according to GSK will return to growth in 2016.

Meanwhile, AZ's Pulmicort Respules asthma product and an authorised generic sold by Teva are already facing generic competition for a generic version launched by Actavis - with others expected to reach the market imminently - following the patent verdict.

AZ has been defending its patents on the inhalation suspension formulation of budesonide for years, and had been hoping to block generics until 2019. Actavis notes that branded and generic sales of the product were around $1.1bn in the 12 months ended June 30, 2014.

AZ said it disagrees with the ruling and would consider legal and other options including an appeal. However the timing for the company is terrible, coming on the back of patent expirations for gastrointestinal therapy Nexium (esomeprazole) in 2014 and next year for cholesterol drug Crestor (rosuvastatin). AZ insists the ruling will not affect its guidance for 2015, which is for a mid-single-digit percent decline in revenues.

Like GSK, AstraZeneca is also consolidating its respiratory franchise in North America, paying $2bn to acquire a portfolio of Almirall products last year and recently agreeing a $700m deal - with Actavis - for rights to another block of respiratory drugs.