Bloomberg News

Glaxo Forecasts 2013 Earnings, Sales Growth

February 06, 2013

Glaxo Forecasts 2013 Earnings Growth as 6 Drugs Await Approval

Glaxo is counting on the regulatory decisions to help revive the stock price after a drop last year that ran counter to a gain in the Bloomberg Europe Pharmaceutical Index of 18 companies. Photographer: Simon Dawson/Bloomberg

GlaxoSmithKline Plc, the U.K.’s largest drugmaker, said sales and profit will rise this year as the company awaits regulators’ approval of six drugs.

Sales will increase about 1 percent, and earnings per share excluding some items will gain 3 percent to 4 percent at constant exchange rates, the London-based company said today in a statement. On that basis, fourth-quarter profit beat analysts’ estimates.

Glaxo is counting on the regulatory decisions to help revive the stock price after a drop last year that ran counter to a gain in the Bloomberg Europe Pharmaceutical Index of 18 companies. The company also plans to reduce costs by at least 1 billion pounds ($1.6 billion) a year by 2016 after pricing pressure in Europe increased last year.

“Today’s results emphasize that Glaxo is in pressing need of new drug momentum,” Mark Clark, an analyst at Deutsche Bank AG in London, said in a note to investors. “2013, however, promises a number of regulatory decisions which could impact forecasts.”

Glaxo has filed for approval of the lung drugs Anoro and Breo, dolutegravir for HIV, dabrafenib and trametinib for skin cancer, and albiglutide for Type 2 diabetes. The U.S. Food and Drug Administration will probably make a decision on dabrafenib and trametinib this quarter, followed by Breo in May, according to Deutsche Bank analysts.

Earnings History

Glaxo shares declined in 2012 as the company missed profit and revenue estimates in each of the first three quarters of the year.

Earnings excluding some items rose 1 percent to 2.29 billion pounds ($3.6 billion), or 32.6 pence a share, in the fourth quarter from a year earlier. Analysts predicted 30.9 pence, the average estimate from 13 analysts surveyed by Bloomberg.

Sales dropped 3 percent to 6.8 billion pounds, compared with the average analyst estimate of 6.83 billion pounds.

Glaxo rose 0.5 percent to 1,449 pence in London.

The company said it expects to repurchase between 1 billion pounds and 2 billion pounds in stock this year, compared with repurchases in 2012 that totaled almost 2.5 billion pounds. The target may increase later in the year, Chief Executive Officer Andrew Witty said on a conference call with journalists today.

Restructuring Charges

Glaxo expects charges of about 1.5 billion pounds related to its expanded cost-cutting program, which will focus on the European business, where sales fell 7 percent amid pricing pressure. The program will also look at simplifying supply chain processes and building capacity in manufacturing and research, the company said.

The drugmaker is seeking to capture more growth in emerging markets. The company increased its stake in an Indian consumer- health subsidiary to 73 percent from 43 percent, and also is buying shares in its Nigerian unit.

Glaxo is looking mostly at acquisitions of early-stage compounds and technologies, rather than focusing on spending billions of dollars to buy experimental medicines in late stages of testing, Patrick Vallance, the drugmaker’s head of pharmaceuticals research and development, said in an interview last month.

“In terms of our acquisition search, we have a very low appetite for acquisitions,” Witty said. With several products in late-stage testing or in regulatory review, “it’s all about the GSK assets at the moment.”

The U.K. company was the second-most active dealmaker among drugmakers last year, behind AstraZeneca Plc, executing 14 in- licensing agreements, according to an analysis by Bloomberg Industries.

Glaxo started a review of its Lucozade and Ribena drinks brands, and a sale is one possible option, Witty said. The brands don’t fit neatly with either the company’s health-care products business or its emerging-markets business, he said.

To contact the reporter on this story: Makiko Kitamura in London at mkitamura1@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net


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