GlaxoSmithKline's sales returned to growth in the third quarter as Britain's biggest drugmaker put patent expiries and a collapse in revenue from troubled diabetes pill Avandia behind it.
GSK is emerging from a revenue trough caused by a slump in sales of Avandia due to heart risks and loss of patent cover on herpes drug Valtrex, as well as the absence of last year's windfall sales of vaccines and drugs for swine flu.
It now has a smaller burden of near-term patent expiries than most of its global rivals although uncertainty remains about when its top-selling inhaled lung drug Advair will face generic competition.
GSK said earlier this year it now expects to report actual sales growth on a full-year basis in 2012, accompanied by an expansion in profit margins, and chief executive Andrew Witty said the group was on track to achieve this goal.
Turnover in the quarter was up 4 per cent from the same period a year ago at £7.1 billion and the company made a pre-tax profit before major restructuring of £2 billion, equivalent to earnings per share (EPS) up 1 per cent at 28.5 pence.
Analysts, on average, had forecast sales of £7 billion and EPS of 28.6p.
GSK also increased its expectation for share buybacks this year to up to £2.3 billion and raised the quarterly dividend 6 per cent to 17 pence a share, underscoring the stock's appeal to investors seeking yield.
Shares in the company were little changed, up 0.8 per cent at 1393.5 pence by 1.40pm following the results, which were broadly in line with expectations.
"Overall, a decent quarter," said Tim Anderson of Bernstein.
Trading conditions have proved tough for pharmaceutical companies around the world as pricing pressures increase. The squeeze is being felt particularly in Europe where many cash-strapped governments are cutting healthcare budgets, but Mr Witty told reporters the impact was no worse than expected.
Mr Witty is diversifying the group to reduce reliance on "white pills in Western markets", the part of the business most vulnerable to generic competition and price cuts imposed by cash-strapped governments.
The result is an increased focus on consumer healthcare and emerging markets in a strategy that is starting to bear fruit.
Countries such as Russia and Turkey, where the government plays an important role in setting drug prices, have also seen a squeeze on prices in recent months but Witty said he remained "an extreme bull" on emerging markets in the long term.
Speaking from Japan, where he is visiting GSK operations, he also forecast a continuing roll-out of dozens of new products in the country in the next five years. The cervical vaccine Cervarix has proved particularly successful in Japan.
GSK sales outside the United States and Europe grew by 17 per cent in the third quarter and now represent 38 percent of group turnover.
Sales of Advair fell 3 per cent in the latest quarter, with a decline in the United States following labelling changes only partly offset by modest growth elsewhere. Analysts have expressed concern about generic competition to the inhaled drug in Europe but Witty said he did not expect any significant generic rivals to be launched in the next few years.
There was a 3 per cent increase in US list prices in September for some GSK products, including Advair and Lovaza, which provided a small boost in the period, although it only affected one month.
In a bid to streamline its business, GSK is currently seeking to sell a clutch of non-core over-the-counter (OTC) products and the company said it was aiming to conclude the bidding process by the end of the year.
Reuters
