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Glaxo beats expectations
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February 18, 1999: 7:15 a.m. ET
Drug giant's profits slip marginally on loss of two blockbuster products
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LONDON (CNNfn) - Glaxo Wellcome, the world's number two drug company, beat analysts' expectations when it announced a 1 percent slip in profits Thursday, sending its stock up in London trading.
The U.K.-based pharmaceutical giant reported full-year pretax profits of 2.67 billion pounds ($4.37 billion) on flat sales of 7.98 billion pounds. The results were about 5 percent higher than market expectations.
Glaxo's (GLXO) shares were trading 1.35 percent higher at 2,020 pence in a declining market in London.
The drug company was expected to put in a weak performance after the expiration of patents on two of its blockbuster products in 1997. Zantac and Zovirax registered a 42 percent and 27 percent slump in sales, respectively.
Much of these losses were offset by strong growth in the group's largest therapeutic area, respiratory drugs, where sales rose 24 percent to 2.19 billion pounds.
Asthma drugs Flixotide and Serevent helped drive the growth, with revenues from both products just falling short of 500 million pounds. Flixotide sales more than doubled last year. Glaxo also sold almost 100 million pounds of its new smoking-cessation pill Zyban in its first full year in the market.
Glaxo chairman Richard Sykes remains upbeat about the current year. "I am confident that this performance, together with the contribution from five new products currently in the process of being launched, will enable us to achieve double digit sales and double digit earnings growth at constant exchange rates in 1999," he said.
Earnings per share fell 2 percent to 51.1 pence in 1998.
The U.S., by far the group's biggest market accounting for 45 percent of sales, grew by 1 percent last year. The loss of Zantac's patent had a large impact - the drug accounted for a quarter of sales in 1997. Now the ulcer drug only accounts for 6 percent of sales.
Mexico, France, Spain and Brazil were Glaxo's fastest growing markets last year.
Glaxo said it would boost capital expenditure by more than 25 percent this year to 600 million pounds. The group cut its borrowings by 135 million pounds last year and at year end had total debt of 1.26 billion pounds.
Speculation will continue surrounding consolidation among drug companies. Analysts still believe that Glaxo might go back and bid for smaller rival SmithKline Beecham (SB), despite the breakdown of talks early last year.
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