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UPDATE 2-Tail-end of swine flu helps Glaxo beat forecasts
April 28, 2010 / 11:16 AM / in 8 years

UPDATE 2-Tail-end of swine flu helps Glaxo beat forecasts

* Q1 earnings 30.7p a share vs consensus 29.5p

* Q1 sales 7.36 bln pounds vs consensus 7.17 bln

* Glaxo CEO says can absorb U.S. healthcare reform costs

* Shares up 1.2 percent, outperforming broader market

(Adds comments from CEO and analyst; latest shares)

By Ben Hirschler

LONDON, April 28 (Reuters) - Bumper sales of swine flu vaccine boosted GlaxoSmithKline’s (GSK.L) first-quarter earnings by 17 percent, more than expected, and the drugmaker reassured investors it could absorb the cost of U.S. healthcare reform.

The rest of 2010 will be tougher, as sales of H1N1 vaccines and flu drug Relenza wane and the group faces accelerating erosion in sales of antiviral Valtrex when multiple generics enter the U.S. market.

Jeffrey Holford, an industry analyst at Jefferies, said almost all the earnings beat was driven by higher than expected delivery of H1N1 vaccines in the first quarter, but Glaxo’s key non-pandemic product lines had also done well.

“Overall, the underlying growth of the business appears to be very good,” he said.

Chief Executive Andrew Witty said he was encouraged by underlying revenue growth of 4 percent, excluding pandemic flu products, which reflected success in diversifying into emerging markets and consumer health.

Sales from conventional “white pills” in Western markets accounted for just 27 percent of first-quarter sales, down from 32 percent a year ago.

The results news lifted Glaxo’s shares 1.2 percent by 1210 GMT on Wednesday, outperforming a flat overall market for European drug stocks .SXDP.

SANGUINE ON U.S. REFORM

As a global player, Glaxo faces pressure from government healthcare reforms and price cuts -- not just in the United States but also Japan and Germany.

Some of its U.S. rivals, notably Eli Lilly (LLY.N), have warned that President Barack Obama’s healthcare reforms will hit earnings in 2010 and 2011.

But Witty said Glaxo had been able to absorb the adverse impact in the first quarter and expected to offset any further hits through an ongoing internal efficiency drive.

Unlike many other large drugmakers, Glaxo does not give explicit guidance on sales and earnings.

Pretax profit was 2.23 billion pounds ($3.41 billion), equivalent to earnings before major restructuring up 17 percent at 30.7 pence per share as sales rose 9 percent to 7.36 billion pounds.

The mean consensus forecast had been for earnings of 29.5p and sales of 7.17 billion pounds, according to Thomson Reuters I/B/E/S.

Sales of pandemic H1N1 flu shots were 698 million pounds, ahead of analyst expectations of around 550 million. For the year as a whole, Witty said he expected sales would be in line with the 883 million pounds sold in 2009.

Top-selling lung drug Advair beat analyst forecasts with sales up 9 percent at 1.3 billion pounds and Witty said he was confident that the risk of generic competition was low, since making a copy of the inhaled medicine was “very challenging”.

Many analysts believe the threat has receded after a decision by Novartis’s NOVN.VX generics unit Sandoz to drop a U.S. partnership with Vectura (VEC.L) on developing a copy.

Glaxo’s strong performance follows better-than-expected quarterly results and resilient outlooks from rival European drugmakers Roche ROG.VX, Novartis and Novo Nordisk NOVN.VX. ($1=.6549 Pound) (Additional reporting by Paul Sandle; Editing by Hans Peters)

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