GSK Reports 15% Increase In Q3 Revenue

GlaxoSmithKline(GSK) reported an increase of 11% in third quarter earnings and is expecting to earn more from its swine flu vaccines in the final quarter of 2009. GSK reported a net profit of GBP1.335 billion for the three months to Sept. 30, compared to GBP1.29 billion pounds in 2008. The company has also reported an increase of 15% in revenue.

OTC, oral healthcare and nutritional healthcare businesses reported an increase of 9%, 10% and 4%, respectively, in the quarter. Sales in Emerging Markets now represent 14% of pharmaceutical turnover compared to 12% this time last year. Growth in these markets is being driven both organically, notably through Seretide, Augmentin and vaccines, and through newly acquired products, which contributed over GBP35m this quarter.

Vaccines sales were lower this quarter, in part due to phasing of shipments. As this business continues to grow, the company expects that the volatility associated with the timing of large tenders and bulk shipments will be a recurring factor in GSK‘s reporting. Year to date sales were up 8% to nearly GBP2.2billion and represented 11% of Group turnover.

Operating profit before major restructuring was GBP£2,223m, a 3% decline in CER terms. Cost of sales was 25.6% of turnover, higher than Q2 2009 and prior year (Q3 2008: 24.8%). The company continues to expect cost of sales to be in the range of 24% to 25% of turnover for the full year.

Operating profit after restructuring was GBP2,071m, a 7% increase in CER terms. This included GBP152m of restructuring charges related to the current restructuring programme (Q3 2008: GBP322m), GBP50m was charged to cost of sales (Q3 2008: GBP130m), GBP82m to SG&A (Q3 2008: GBP157m) and GBP20m to R&D (Q3 2008: GBP35m). EPS after restructuring of 26.3p increased 11% in CER terms (a 31% increase in sterling terms) compared with Q3 2008.

Andrew Witty, CEO of GSK, said: “Overall, the number of products facing generic competition is reducing, although 2010 will remain challenging as the impact of expected generic competition to Valtrex is absorbed. At the same time, we are rapidly increasing the number of new products. In the last two weeks, we have received US approvals for Cervarix, Votrient and Arzerra. This quarter 2 key FDA filings were also completed: Avodart for prostate cancer risk reduction and Menhibrix, a vaccine to protect against meningococcal disease and Haemophilus influenzae type b (Hib).

“Our restructuring programme to deliver GBP1.7 billion in annual savings is making good progress and cumulative annualised cost savings now amount to GBP1billion. This programme is helping to improve productivity and support investment in our strategic priorities.

“In conclusion, and as I have previously described, our third quarter performance reinforces our expectations of an improved performance for GSK in the second half of 2009. In the fourth quarter, I expect further improvement including significant sales generated from our influenza products. The delivery of our strategic priorities is required over a multi-year time frame, but I believe that the progress we have made so far provides us with a strong platform to realise our long-term objective of delivering sustainable growth for shareholders.”