GSK GSK plc

By Denise Roland 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 25, 2019).

LONDON -- GlaxoSmithKline PLC said newer vaccines and a tax windfall softened the bite of competition from a new generic version of its best-selling inhaler Advair in the second quarter.

The British health-care giant said Wednesday that revenue rose 5% at constant currencies to GBP7.8 billion ($9.74 billion) in the three months to June 30, largely thanks to strong sales of shingles vaccine Shingrix. Net profit more than doubled to GBP964 million, mostly due to accounting changes. Adjusted earnings per share, a closely watched measure that strips out certain one-time items, rose 4% to 30.5 pence (38 cents) in the quarter, aided by a one-time tax boost.

The company still expects earnings to fall this year, but by less than before. It now forecasts adjusted earnings per share to fall by 3% to 5% in 2019, an improvement from its earlier prediction of a 5% to 9% decline. It pointed to an improved operating performance and a one-off tax benefit for the upgrade.

Glaxo is facing competition from a lower-cost version of its blockbuster asthma treatment Advair for the first time, which is cutting into profits. Advair lost patent protection in 2010, but went unchallenged for nearly a decade because of the difficulties of imitating the action of an inhaled product. That changed earlier this year, when Mylan NV started selling its lower-cost version.

Lower Advair sales weighed on Glaxo's pharmaceuticals business in the quarter, which reported a 1% decline in revenue to GBP4.3 billion. That was offset by a strong performance from its vaccines arm, which posted a 23% increase in sales to GBP1.6 billion. Its consumer-health-care business, which sells drugstore staples such as toothpaste and over-the-counter painkillers, notched GBP1.9 billion in sales, up 4% from a year earlier.

Glaxo's ramped-up investment in cancer drugs is also weighing on earnings. The company gained a toehold in the oncology market with its $4.16 billion acquisition of Tesaro last year. The purchase handed Glaxo ovarian cancer drug Zejula and bulked up its cancer-drug research pipeline. Its bet on cancer drugs is part of a wider effort to replenish its pipeline under new Chief Executive Emma Walmsley. Since taking charge two years ago, Ms. Walmsley has cut dozens of research projects to focus only on its biggest opportunities. She is also sharpening Glaxo's focus on prescription drugs and vaccines. Glaxo announced plans last year to spin off its consumer-healthcare business after merging it with Pfizer Inc.'s consumer-healthcare unit.

Glaxo also Wednesday announced the appointment of a new chairman, Jonathan Symonds. The executive is currently deputy group chairman of HSBC Holdings PLC, and previously held executive roles at Novartis AG and AstraZeneca PLC.

Write to Denise Roland at Denise.Roland@wsj.com

(END) Dow Jones Newswires

July 25, 2019 02:47 ET (06:47 GMT)

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