GlaxoSmithKline Q3 Profit Rises On Higher Sales - Update

(RTTNews) - Pharmaceutical giant GlaxoSmithKline plc ( GSK | Quote | Chart | News | PowerRating, GSK.L | Quote | Chart | News | PowerRating) on Wednesday reported an increase in third-quarter profit, as sales grew 15% from last year, helped by favorable currency movements as well as demand for its flu products. The company said it expects further growth in the fourth quarter, including significant sales of flu products.

The UK-based company's third-quarter profit attributable to shareholders increased to GBP 1.335 billion from GBP 1.027 billion in the prior year. Earnings per share were 26.1 pence, compared to 20.0 pence in the year-ago quarter.

Profit attributable to shareholders before major restructuring, which excludes restructuring charges relating to the Operational Excellence programme as well as the acquisitions of Reliant Pharmaceuticals and Stiefel, increased to GBP 1.444 billion or 28.3 pence per share from GBP 1.287 billion or 25.0 pence per share.

Pre-tax profit increased to GBP 1.913 billion from GBP 1.553 billion in the prior year. Profit after taxation was GBP 1.370 billion, compared to GBP 1.056 billion last year.

Turnover for the quarter rose about 15% to GBP 6.758 billion from GBP 5.882 billion a year earlier. The increase was 3% on constant currency rates. Operating profit improved to GBP 2.071 billion from GBP 1.657 billion.

Segment-wise, Pharmaceuticals turnover increased to GBP 5.593 billion from GBP 4.888 billion. Pharmaceuticals' operating profit was GBP 2.258 billion for the quarter, compared to GBP 1.950 billion last year.

Turnover from respiratory products was GBP 1.594 billion, with sales of Seretide/Advair growing 5% to GBP 1.2 billion. Anti-virals generated GBP 1.049 billion and Relenza sales were GBP 182 million reflecting continued orders from Governments for pandemic stockpiling.

Central nervous system, or CNS, products had quarterly turnover of GBP 418 million, while Cardiovascular and urogenital products generated GBP 552 million. Metabolic turnover was GBP 284 million, and Anti-bacterials contributed GBP 376 million to total turnover. Oncology and emesis generated GBP 149 million. Vaccines had a third-quarter turnover of GBP 802 million, down 2% from last year.

US pharmaceuticals' quarterly turnover dropped to GBP 2.143 billion from GBP 2.101 billion in the prior year. The segment's operating profit was GBP 1.385 billion, compared to GBP 1.353 billion last year.

The company noted that sales of several products continue to be hurt by generic competition in the U.S. CNS product Imigran's sales were down 74% to GBP 53 million and epilepsy drug Lamictal's sales dropped 21% to GBP 121 million. Turnover from CNS product Requip dropped 30% to GBP 43 million and antidepressants Wellbutrin XL sales declined 81% to GBP 6 million, reflecting the sale of the product in the USA to Biovail in the second quarter.

In Europe pharmaceuticals division, turnover improved to GBP 1.734 billion from GBP 1.563 billion and operating profit grew to GBP 1.040 billion from GBP 903 million.

Emerging Markets pharmaceuticals reported third-quarter turnover of GBP 765 million, compared to GBP 581 million last year. Operating profit of the segment improved to GBP 291 million from GBP 216 million.

Turnover from Asia Pacific/Japan pharmaceuticals increased to GBP 643 million from GBP 464 million, and segment' operating profit rose to GBP 333 million from GBP 259 million.

Consumer Healthcare's turnover for the quarter improved to GBP 1.165 billion from GBP 994 million. Its operating profit grew to GBP 287 million from GBP 239 million.

Over-the-counter medicines generated GBP 567 million and Oral healthcare brought in GBP 375 million in quarterly turnover. Nutritional healthcare generated GBP 223 million.

Cost of sales for the group increased to GBP 1.782 billion from GBP 1.590 billion, mainly due to the impact of generic competition to higher margin products in the U.S. and changes to product mix in the quarter.

Selling, general and administrative expenses increased to GBP 2.146 billion from GBP 1.819 billion, reflecting investment in growth markets, increased pension costs and the consolidation of the Stiefel business for the first time.

In the quarter, gains from asset disposals were GBP 17 million, compared to GBP 21 million last year. The company did not record fair value movements on financial instruments in the latest period, compared to a GBP 37 million charge last year.

In July, the company said its second-quarter profit attributable to shareholders increased to GBP 1.46 billion or 28.1 pence per share from GBP 1.31 billion or 24.4 pence per share in the prior-year quarter. Group turnover for the quarter increased to GBP 6.75 billion from GBP 5.87 billion in last year period.

Profit attributable to shareholders for the first three quarters of the fiscal increased to GBP 3.901 billion or 76.4 pence per share from GBP 3.620 billion or 68.7 pence per share in the previous year. Turnover for nine months increased to GBP 20.274 billion from GBP 17.442 billion.

Regarding the US marketplace, Andrew Witty, Chief Executive Officer of the company, said today, "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."

"...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," Witty added.

Further, the company declared a third interim dividend of 15 pence per share, compared to 14 pence last year. The equivalent interim dividend receivable by ADR holders is 49.002 cents per ADS. The ex-dividend date will be November 4, 2009, with a record date of November 6, 2009 and a payment date of January 7, 2010.

Among peers, Merck & Co. Inc. (MRK | Quote | Chart | News | PowerRating) said last week that third-quarter profit surged from the previous year, helped by the sale of its interest in animal health business Merial Limited, as well as the growth of its key products and cost control. The company's third quarter net income attributable to Merck increased to $3.424 billion or $1.61 per share from $1.093 billion or $0.51 per share in the prior year. Net income for the period was $3.455 billion, compared to $1.124 billion last year. Sales for the quarter rose 2% to $6.05 billion from $5.944 billion.

Pfizer Inc. (PFE | Quote | Chart | News | PowerRating), another peer, recently reported third-quarter net income of $2.88 billion or $0.43 per share, higher than prior year's $2.28 billion or $0.34 per share, driven by sharply lower one-time charges as well as cost-reduction initiatives. Quarterly revenues dropped 3% to $11.62 billion from $11.97 billion in the comparable quarter last year.

GSK is currently trading at $40.77, down $0.10 or 0.24%, on 222,136 shares. GSK.L is currently trading at 1,246 pence, down 0.84% on the London Stock Exchange.

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