LONDON (Reuters) - GlaxoSmithKline (GSK.L) quarterly sales and profits beat expectations, buoyed by a weak pound, but the drugmaker warned earnings stripping out currencies could slip in 2017 if generic copies of its lung drug Advair arrive in the United States.
Outgoing Chief Executive Andrew Witty, presenting his final set of results, said the 2017 profit outlook was “very consistent” with market consensus and showed GSK was well placed to absorb the potential loss of Advair.
GSK is buttressed by its large consumer health and vaccines units, while the core pharmaceuticals business is seeing increased demand for new drugs.
“Once we are through this window of Advair, the company doesn’t really have any material patent expirations until the late 2020s, which is an extraordinarily long period of time,” Witty told reporters.
GSK shares slipped around 1 percent following Wednesday’s results. UBS analyst Michael Leuchten said the 2017 outlook might cause some confusion but was broadly in line with expectations.
Quarterly sales rose 21 percent in sterling terms to 7.59 billion pounds ($9.48 billion), generating core earnings per share (EPS) up 45 percent at 26.1 pence.
Analysts, on average, had forecast sales of 7.45 billion pounds and core EPS, which excludes certain items, of 25p, Thomson Reuters data shows.
GSK said EPS, in constant currencies, were set to be flat to slightly lower in 2017, if substitutable generic copies of Advair arrive in the United States by mid-year, as most analysts expect. If generics don’t launch, core EPS should increase between 5 and 7 percent.
If January 2017 average exchange rates were applied to the whole of 2017, sterling core EPS would benefit by around 9 percent, the group added.
GSK has been preparing for the loss of Advair exclusivity for the past two years but the potential launch of generics will still be a blow, since the medicine is highly profitable and has sold more than a $1 billion annually since 2001.
The U.S. Food and Drug Administration is due to decide whether to approve the first substitutable Advair generic, from Mylan (MYL.O), by March 28. A rival version from Hikma (HIK.L) and Vectura (VEC.L) has an approval decision date of May 10.
It will be up to Witty’s successor Emma Walmsley, 47, to steer GSK through the challenge when she takes over on April 1. Witty said she was likely to give a strategy update in the second half of 2017.
Britain’s largest pharmaceuticals company, which generates more than 95 percent of its sales overseas, has been one of the biggest beneficiaries of the pound’s sharp depreciation since last year’s Brexit referendum.
That has cut worries about dividend payouts and lifted the scope for acquisitions, while GSK’s high-volume, lower-margin pharma strategy is looking smarter today than a few years back as U.S. President Donald Trump attacks high drug prices.
GSK’s upcoming new medicines include a novel inhaler that combines three medicines in one device and a promising vaccine for shingles. But the company also faces competition in its successful HIV business from a new Gilead (GILD.O) medicine.
Reporting by Ben Hirschler; editing by Martinne Geller and Susan Thomas