Glaxo Raises Share Buyback Plan as 10 New Drugs May Be Filed

GlaxoSmithKline Plc (GSK), the U.K.’s largest drugmaker, increased a share buyback plan by 15 percent and raised the quarterly dividend as the company prepares to seek approval to sell new products next year.

Glaxo will repurchase as much as 2.3 billion pounds ($3.68 billion) of stock this year, 300 million pounds more than an earlier plan, the London-based company said today in a statement. The drugmaker increased its dividend by 6 percent to 17 pence, after raising its dividend by 7 percent in each of the first two quarters of this year. That compares with a Bloomberg dividend forecast of 17 pence.

The drugmaker may file as many as 10 compounds for approval next year and expects to sell a group of consumer health-care brands by the end of this year, Chief Executive Officer Andrew Witty said in a conference call to discuss third-quarter earnings. That may help offset declining revenue from the Avandia diabetes drug, the Valtrex antiviral and pandemic-flu products, which together had a 129 million-pound drop in sales in the quarter.

“There are clear signals for growth in 2012 and the increased share buyback is a bit of a nice sweetener,” said Navid Malik, a London-based analyst with Merchant Securities Ltd.

The drugmaker in February announced its first share buyback since 2008 in a bid to reassure investors that expenses for investigations and lawsuits were under control. Glaxo has purchased 1.83 billion pounds of stock this year.

Shares Rise

The shares rose 0.8 percent, to 1,393 pence in London trading. The stock has returned 17 percent in the past year including reinvested dividends, compared with 8.3 percent for the Bloomberg Europe Pharmaceutical Index.

Glaxo today reported third-quarter profit little changed from a year earlier, held back by lower sales of the Avandia diabetes drug, the Valtrex antiviral and pandemic-flu products. Earnings excluding restructuring costs were 28.5 pence a share, matching analyst estimates. Sales rose 4.3 percent to 7.1 billion pounds from a year earlier, beating analyst estimates.

Glaxo stopped promoting Avandia worldwide in 2010 after regulators withdrew it from the market in Europe and limited sales in the U.S. because research showed an increased risk of heart attacks. Valtrex has faced generic competition since 2009, and flu sales sank after the end of the pandemic last year. Sales excluding those three items, which Glaxo calls underlying growth, rose 6 percent.

Consumer-health revenue increased 5.6 percent to 1.33 billion pounds, and sales of vaccines gained 14 percent to 1.14 billion pounds.

Benlysta Sales

Three Glaxo products have been cleared for sale this year, including Benlysta, a therapy for the auto-immune disease lupus that was approved by U.S. regulators in March. Benlysta generated 6 million pounds for Glaxo.

The compounds in late-stage development include Relovair, which Glaxo is developing as a successor to the Advair asthma inhaler. Advair, Glaxo’s best-selling product, made up 19 percent of total revenue in the first half of the year.

U.S. sales of Advair and forthcoming Relovair may decline 30 percent between 2013 and 2016 as generic and new branded competitors, particularly Novartis AG’s NVA237 and QVA149, come to market, Barclays Capital analyst Mark Purcell said in a report yesterday. Novartis’s announcement yesterday that the U.S. filing for NVA237 will be delayed underscores the difficulty in getting drugs approved in the country and may mean that Advair sales are stable for longer, he said.

Advair Competition

“As we stand today, we’re not going to see a generic of any materiality in Europe for the next few years,” Witty told reporters on a telephone conference call today. “We’re probably in the most optimistic place we’ve been in for several years,” saying some filings of possible generics have “disappeared” in some countries.

Glaxo has said it’s seeking buyers for over-the-counter products such as the Alli diet pill, Lactacyd soap, and the Nytol sleep aid, seeking to focus its consumer-health unit on faster-growing brands such as the pain reliever Panadol. Witty said he is “confident” that a sale would be announced by the end of the year.

To contact the reporter on this story: Makiko Kitamura in london at mkitamura1@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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