July 26, 2011 / 11:15 AM / 7 years ago

UPDATE 1-GlaxoSmithKline sales fall slows in Q2, profits jump

* Q2 revenue 6.72 bln pounds vs consensus 6.73 bln

* EPS 25.0 pence vs consensus 25.3p

* Positive results for Promacta in hepatitis C

* GSK reiterates expects sales growth in 2012 (Adds results details, background)

By Ben Hirschler

LONDON, July 26 (Reuters) - GlaxoSmithKline sales fell 4 percent in the second quarter, but the decline was slower than in previous quarters and profits were markedly higher than a year ago, when Britain’s biggest drugmaker took a huge legal charge.

The company also said on Tuesday an experimental drug for hepatitis C had produced positive results in clinical tests.

Chief Executive Andrew Witty reiterated his confidence that GSK would return to sales growth in 2012, as it emerges from a run of drug patent losses ahead of its main rivals.

GSK has been working its way through a revenue trough, reflecting sharp declines in sales of diabetes pill Avandia and herpes drug Valtrex, as well as the absence of last year’s windfall sales of vaccines and drugs for swine flu.

Quarterly sales of 6.72 billion pounds were broadly in line with analyst expectations and compared with declines of 10 percent and 11 percent in the preceding quarters.

Sales excluding pandemic flu products, Avandia and Valtrex increased by 5 percent.

Analysts, on average, had expected sales of 6.73 billion pounds in the three months to June 30, according to Thomson Reuters I/B/E/S.

Witty is diversifying the group to reduce reliance on “white pills in Western markets”, the part of the business most vulnerable to generic competition and price cuts. The result is an increased focus on consumer healthcare and emerging markets.

GSK still needs its core pharma operations to produce a decent array of new medicines, however, so news that Promacta had been successful in a late-stage study in hepatitis C was encouraging.

The drugmaker expects to present Phase III clinical trial results on 14 new drugs this year and next.

Quarterly earnings, as expected, were sharply up on 2010, due to the absence of last year’s 1.6 billion pounds legal charge to settle litigation over Avandia’s links to heart risks and other matters.

EPS of 25.0 pence compared with a consensus of 25.3p and the 2.6p recorded a year ago.

Rising confidence that GSK is coming up the other side of its sales and earnings trough has buoyed the company’s shares in recent months within a depressed pharmaceuticals sector and the stock now trades at a premium to many rivals.

With a 2011 price-to-earnings ratio of 11.9 times, GSK stands on a slightly higher rating to Swiss drugmakers Novartis and Roche , both of which pleased the market with their results last week.

Editing by Kate Kelland and David Hulmes Reporting by Ben Hirschler

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