Profits boost for GlaxoSmithKline after sales growth
GlaxoSmithKline (GSK) has booked a hefty jump in first-quarter profits thanks to strong sales of new drugs and a currency boost from the Brexit-hit pound.
The FTSE 100 drugs giant said total operating profits jumped by £995 million to £1.7 billion in the first quarter of 2017, with a healthy demand for meningitis medicine bolstering vaccine sales by 31%.
GSK, which reports in sterling but makes the majority of its sales overseas, has been an enjoying an uplift from sterling's slump since the EU referendum vote, while the disposal of its anaesthesia business and tighter cost controls have also boosted profits.
The update will bring some cheer to new chief executive Emma Walmsley who has taken the helm as the firm braces for a potential earnings hit from generic rivals to its blockbuster Advair asthma treatment.
The group previously warned if generic competition to Advair launched in the US this summer, it could wipe out earnings growth and even leave earnings per share lower.
Ms Walmsley, who is now the most powerful female FTSE 100 boss, said: "This is a positive start for the year with sales growth in all three of our businesses and an improvement in the group's operating margin.
"Our clear focus is on commercial execution and preparation for near-term launches in respiratory, HIV and vaccines."
Turnover climbed 19% to £7.4 billion in the first quarter, and recorded 5% growth with the benefit of the weak pound on overseas earnings stripped out.
Shares in the firm were down more than 1% in afternoon trading on the London Stock Exchange.
The firm maintained its outlook for adjusted earnings per share on a constant currency basis, but said it was unable to give guidance on its total results because it could not " reliably forecast certain material elements"
Strong growth of new products bolstered pharmaceutical sales by 4% in the first quarter without the benefit of the currency translation.
However, its consumer healthcare arm eked out 2% growth at constant currency following the sale of Nigerian drinks business, tough trading on international markets and a later start to the allergy season.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said it still waits to be seen how Ms Walmsley plans to transform the firm.
He said: "Vaccines are the stand out performer this time round, particularly the new Bexsero meningitis B vaccine.
"In fact new drugs were good across the board. New respiratory drugs more than offsetting the decline in Advair sales will be particularly satisfying given the pain the loss of patent on that blockbuster has caused.
"However, we remain a little in limbo as far as the future of GSK is concerned. Sir Andrew Witty was with the pharmaceuticals giant for 32 years, but his replacement Emma Walmsley is a relative newbie to the world of pharma.
"Does new blood mean a new direction? Ms Walmsley may be seen as the heir to Sir Andrew, but she's still likely to want to stamp her mark on the group. We will have to wait until the end of July to find out."