GlaxoSmithKline beats profit forecasts despite Advair hit, lower margins

[LONDON] A further slide in sales of lung drug Advair and lower profit margins following a business overhaul hit GlaxoSmithKline in the second quarter, although core earnings per share fell by a less than expected 9 per cent.

The drugmaker recently sold its marketed cancer drugs to Novartis and bought the Swiss group's vaccines, while increasing its consumer health business through a joint venture.

The revamp is designed to ensure sustainable growth, after past profit misses, but the strategy will take time to pay off and GSK on Wednesday reiterated its forecast for a high-teens percentage decline in 2015 earnings, at constant exchange rates.

Chief executive Andrew Witty, who reset expectations for the group in May, is now under intense pressure to deliver a promised recovery from next year, following past profit disappointments and a damaging corruption scandal in China.

Longer-term hopes hinge on the company's research pipeline and GSK said it had around 40 new drugs and vaccines in Phase II or Phase III clinical development. The performance of the HIV business, which GSK opted to retain in May after considering a spin-off, was a bright spot in the latest quarter.

Shares in the company were up 3.6 per cent at 1376 pence by 1124 GMT.

In sterling terms sales rose 6 per cent to 5.9 billion pounds (S$12.6 billion) in the three months ended June 30, reflecting the first full quarter that included products previously owned by Novartis.

However, core earnings fell to 17.3 pence a share because of lower returns on Advair and the fact GSK has swapped high-margin cancer drugs for less profitable consumer products.

Analysts on average had forecast sales of 5.9 billion pounds and core EPS, which excludes certain items, of 16.7p, according to Thomson Reuters.

REUTERS