Glaxo suffers drug setback
Pharmaceuticals giant GlaxoSmithKline today raised its full-year earnings target after reporting a boost in sales despite setbacks in the launch of new drugs.
London-based Glaxo said it was upping its guidance for earnings per share growth from 12% to the “mid teens” as pre-tax profits rose 21% to £2bn (€2.97bn) during the three months to September 30.
Group sales were up 7% to £4.9bn (€7.3bn), although the performance in Europe was flat at £1.3bn (€1.93bn) while international markets lifted 3% to £1bn (€1.48bn) and the US by 14% to £2.6bn (€3.87bn).
However, the firm also admitted a number of setbacks, including the development of diabetes drug Redona and the scrapping of a sepsis treatment.
Meanwhile, there have been delays with cancer vaccine Cervarix, which will not be filed for approval in the US until April.
The news sent shares down by 3% today and followed rival AstraZeneca’s decision to ditch an experimental stroke drug after it failed to deliver results in clinical trials.
Despite the update, chief executive Jean-Pierre Garnier told investors the firm was launching a new £6bn (€8.93bn) share buyback programme and would increase the year’s dividend to 48p compared with 44p in 2005.
Glaxo is also hoping for a boost this winter from new influenza vaccine FluLaval and expects to bring 25 million doses to the US market, while its Tykerb breast cancer treatment has been filed for approval in both the US and Europe.
The head of spread betting at GFT Global Markets Martin Slaney said: “Good figures overall, but as always with pharmaceuticals the pipeline is the key to future prospects – the sector was already hurting today following AstraZeneca’s stroke drug failure.
“And Glaxo’s problems with Cervarix and Redona have exacerbated what is possibly just a knee-jerk, short term reaction. Longer term the buyback should help support the stock.”
Keith Bowman, equity analyst at Hargreaves Lansdown stockbrokers, said: “Unfortunately, when all said and done, Glaxo has disappointed on the fundamentals and the future of the business – delays and difficulties in relation to new developmental drugs is not what investors wanted to hear.”
