Glaxo Sticks to 2016 Forecast as U.S. Pricing Pressure Continues

  • Earnings per share were 32 pence; estimate was 29.4 pence
  • U.K. drugmaker expects EPS to grow 11 percent to 12 percent

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GlaxoSmithKline Plc, the U.K.’s biggest drugmaker, left its profit forecast unchanged even after a record drop in the pound helped third-quarter sales and earnings exceed expectations.

Earnings per share excluding certain costs rose 39 percent to 32 pence from a year earlier, the London-based company said in a statement on Wednesday. That beat the 29.4-pence average of 12 analyst estimates compiled by Bloomberg. The company stuck to its forecast for full-year profit growth of between 11 percent and 12 percent at constant-exchange rates.

Sales also surpassed estimates, climbing to 7.54 billion pounds ($9.2 billion) after one-time gains from seasonal flu vaccine demand and rebates on Advair, Glaxo’s best-selling respiratory drug. Pricing pressure in the U.S. will continue for several years, Chief Executive Officer Andrew Witty said Wednesday, echoing comments by his counterpart at Novartis AG the previous day. Glaxo shares fell the most in eight weeks.

The drugmaker, which earns about a third of its sales in the U.S., is benefiting from a record plunge in the British pound following the U.K.’s vote in June to leave the European Union. In addition to the currency effect, revenue was helped by an 8 percent gain in sales of respiratory products, with growth from new medicines exceeding the decline in Advair. The blockbuster drug is facing generic competition in some markets and cheaper copycats may reach the U.S. next year.

For a quick wrap of the analyst commentary today, click here.

While Advair brought in 857 million pounds in the quarter, 7 percent less than a year earlier at constant-exchange rates, that beat analysts’ estimate of 777.9 million pounds. Advair sales got a one-time boost as U.S. payers adjusted their rebates, Glaxo said in the statement.

Glaxo also saw a 20 percent increase in sales at the vaccines division amid demand for seasonal flu shots and growth in the meningitis portfolio acquired from Novartis. The company said it was withdrawing its cervical-cancer vaccine Cervarix from the U.S. amid slow sales there, leaving the market to Merck & Co., which Tuesday reported better-than-expected sales of its rival Gardasil vaccine.

Glaxo shares fell as much as 2.2 percent, and was down 1.8 percent to 1,600 pence as of 2:08 p.m. in London trading. The FTSE 100 Index of which it’s a member declined 1.2 percent. Before today, the stock had risen 19 percent this year.

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