Glaxo’s earnings beat estimates as new product sales double

Bloomberg

GlaxoSmithKline Plc, the U.K.’s biggest drugmaker, reported second-quarter earnings that beat analysts’ estimates and raised its forecast for the year as sales of new products doubled.
Profit excluding certain costs surged 42 percent to 24.5 pence from a year earlier, the London-based company said in a statement on Wednesday. That topped the 21-pence average of analyst estimates compiled by Bloomberg. On that basis, Glaxo forecast an increase in full-year earnings of 11 percent to 12 percent, excluding currency effects, up from 10 percent to 12 percent
previously.
Glaxo is stoking sales of its new HIV and respiratory products as pricing pressure and patent expirations hurt earnings from its best-selling asthma treatment Advair. New product sales doubled to 1.05 billion pounds ($1.38 billion) last quarter from 446 million a year earlier. Advair brought in 900 million pounds, beating analysts’ estimate of 827.9 million pounds.
Total sales for the three-month period climbed 4 percent on a constant-exchange rate basis to 6.53 billion pounds, compared with a 6.34 billion-pound average estimate from analysts. Without adjusting for currency fluctuations, revenue gained 11 percent.
Sales of many of Glaxo’s new products exceeded analysts’ expectations. Its HIV drug Tivicay brought in sales of 225 million pounds, compared with an analyst estimate of 213 million pounds. Sales of new respiratory drugs of 243 million pounds more than offset the Advair impact, and overall respiratory sales were unchanged from a year ago, the company said.
Glaxo’s shares rose as much as 2.8 percent to 1,714 pence in London trading after earnings were reported, reaching the highest level in almost three years.
The British pound weakened following the U.K. vote to leave the European Union. That benefits Glaxo, which earns the largest chunk of its revenue in the U.S. and will repatriate the earnings at a more favorable rate.
“Clearly, currency has had a significant impact on our results for the quarter, both in total and in core reporting,” Chief Executive Officer Andrew Witty said on a media call. “For GSK this resulted in a tail wind over the quarter of 7 percent to sales and 26 percent to core earnings per share.”
Glaxo also said the value of its put options in consumer healthcare and HIV joint ventures has increased as a result of the sterling’s depreciation, resulting in balance sheet charges of 1.8 billion pounds in the quarter.
With Witty and vaccines division chairman Moncef Slaoui set to retire next year, the company also faces the challenge of finding seasoned leadership to drive sales growth and revitalize its pipeline of experimental medicines. Witty said the board was considering both internal and external candidates to replace him, and that a decision might be made near the end of the year.