GlaxoSmithKline Swung to Profit in Fourth Quarter, Helped by Weak Pound -- 2nd Update
February 08 2017 - 11:19AM
Dow Jones News
By Denise Roland
LONDON-- GlaxoSmithKline PLC braced investors for the likely
launch of a cheap copycat of its blockbuster respiratory drug
Advair in the U.S., saying such competition would scuttle any
profit growth in 2017.
Core earnings per share would be flat or decline slightly in
2017 if a cheap competitor to Advair entered the U.S. market in the
middle of the year, the U.K.-based drugmaker said Wednesday.
Glaxo shares were down 0.3% at GBP15.58 ($19.47) on Wednesday
afternoon, after falling by as much as 2.9%.
Advair lost patent protection in 2010, but the complexities of
mimicking the action of an inhaled drug has delayed the arrival of
generic versions. Mylan NV and Hikma Pharmaceuticals PLC are likely
to launch competing products this year.
Sales of Advair are already suffering from competition but the
introduction of a direct substitute would sharply accelerate that
decline. Glaxo said the arrival of a generic competitor would slash
U.S. Advair revenue to around GBP1 billion in 2017, compared with
GBP1.8 billion in 2016.
Glaxo said that should those products fail to win approval from
U.S. regulators, or be delayed, core earnings per share would
increase 5%-7% at constant exchange rates.
"Clearly, this year we face some uncertainty as to the level of
our earnings performance given the possibility of substitutable
generic competition to Advair in the U.S.," said Chief Executive
Andrew Witty.
Those alternative outlooks came as the company posted soaring
profit and sales for the three months to Dec. 31, thanks to
increased revenue from newer drugs and a boost from the weakness of
the pound.
The company said core operating profit, a measure that strips
out one-time items, climbed 52% to GBP2.1 billion, while revenue
rose 21% to GBP7.6 billion. Net profit was GBP257 million, compared
with a GBP354 million loss in the same period a year earlier, when
restructuring costs related to Glaxo's $20 billion asset-swap deal
with Novartis AG ate into earnings.
Glaxo, which reports in sterling but makes most of its revenue
in other currencies, is benefiting from the weakness of the pound
as politicians lay the groundwork for exiting the European Union.
Stripping out the currency effect, core operating profit rose 16%
and revenue increased 3%.
The company's solid performance was largely thanks to a rise in
sales from its newer drugs. Glaxo said revenue from a string of
medicines launched in the last few years, such as Tivicay for HIV
and Advair-successor Breo, grew 71% at constant exchange rates to
GBP1.4 billion of sales in the fourth quarter.
Write to Denise Roland at Denise.Roland@wsj.com
(END) Dow Jones Newswires
February 08, 2017 11:04 ET (16:04 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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