GlaxoSmithKline earnings slipped 1 per cent in the third quarter, hit by the cost of writing off stocks of its controversial diabetes drug Avandia and increased generic competition for herpes drug Valtrex.
Both elements had been anticipated by investors and the earnings number was better than analysts had generally expected, although sales were slightly light.
Like other major drug companies, Glaxo is suffering from multiple patent expiries on key medicines, although it has taken the hits earlier than many of its rivals and CEO Andrew Witty now sees sustainable growth going forward.
Pretax profit before major restructuringin the third quarter was 1.971 billion pounds ($3.11 billion), equivalent to earnings of 28.2 pence per share, on sales up 1 percent to 6.813 billion.
Analysts had forecast EPS of 26.2p and turnover of 6.849 billion.
Last month European regulators suspended Avandia and severe restrictions were placed on its U.S. sales, following evidence suggesting a linking to heart attack risk. Glaxo said at the time it would take a charge as result.
The next trigger for Glaxo shares could be approval of its keenly awaited new drug Benlysta, the first new treatment for lupus in 50 years, which is expected to have annual sales of $2.3 billion by 2014.
The new drug, being developed with Human Genome Sciences, will be reviewed by a US advisory panel on November 16th and the Food and Drug Administration is due to decide whether to approve it by December 9th.
Aeparately, Eli Lilly and Co today reported better-than-expected quarterly earnings, helped by tight cost controls, but sales fell short of Wall Street forecasts.
The drugmaker earned $1.3 billion, or $1.18 per share. That compared with $942 million, or 86 cents per share in the year-earlier period, when Lilly took a number of special charges.
Excluding special items, Lilly earned $1.21 per share. Analysts on average expected $1.15 per share, according to Thomson Reuters I/B/E/S.
Lilly said global revenue rose 2 per cent to $5.65 billion, due to to higher prices, coming in below Wall Street expectations of $5.77 billion.
"Overall a reasonable quarter for the company ... yet for many investors it is the longer-term financial outlook that matters more, and here Lilly still looks challenged," Sanford Bernstein analyst Tim Anderson said in a research note.
JP Morgan analyst Chris Schott said the earnings beat was due to lower-than-expected expenses, while disappointing sales were due mainly to decreased stocking by US wholesalers.
Based on earnings trends so far this year and lower estimates of costs of US healthcare reforms, Lilly raised its full-year 2010 earnings forecast, excluding special items, to between $4.65 and $4.75 per share. In July, it had forecast $4.50 to $4.65 per share. The new forecast reflects profit growth of 5.2 to 7.5 per cent.
But then things get tougher. Wall Street expects Lilly earnings to fall steadily from next year to 2014, when the company loses patent protection on many of its best-selling medicines.
Reuters