GlaxoSmithKline is cautious on 2018, as drug competition looms

Earnings


GlaxoSmithKline said on Wednesday its earnings could slip this year, after a better-than-expected performance in the fourth quarter, as the drugmaker faces increased competition in its core respiratory and HIV businesses.

After growing adjusted earnings per share (EPS) 4 percent in 2017, at constant exchange rates, GSK sees them flat to down 3 percent in 2018, if generic copies of its Advair inhaler launch in the U.S market by mid-year as many analysts expect. Without generics, earnings would be up 4 to 7 percent.

Despite the Advair hit and looming competition from a rival Gilead Sciences HIV drug, Chief Executive Emma Walmsley said she was “increasingly confident” GSK could deliver mid to high single digit earnings growth over the 2016 to 2020 period.

Walmsley, who took over as chief executive 10 months ago, is battling to rebuild the company’s drug pipeline by refocusing its research and appointing heavyweight outsiders, such as veteran Roche scientist Hal Barron.

Still, the stock has underperformed the European health-care sector by 20 percent during her tenure and Walmsley’s decision to look at Pfizer’s consumer health-care business — a potential $20 billion deal — has unnerved investors.

GSK is in the running to buy the Pfizer operation, alongside Reckitt Benckiser, according to sources familiar with the matter. Walmsley, who used to head GSK’s toothpaste-to-painkiller consumer unit, said last month she was looking but the deal was not essential for GSK.

Investors are worried a large acquisition could strain GSK’s ability to pay its current 80p a share dividend beyond 2018.

GSK has long been Britain’s biggest drugmaker but after many years in which the shares have largely moved sideways, smaller rival AstraZeneca has almost closed the gap in terms of market value.

GSK reported fourth-quarter adjusted EPS of 27.2 pence on sales of 7.64 billion pounds ($10.61 billion). Analysts, on average, had forecast 26.0p and 7.49 billion pounds, according to Thomson Reuters data.



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