GlaxoSmithKline’s difficult year continued today as shares tumbled on a warning that it no longer expects to improve a key measure of earnings.
The drugs giant, which has been at the centre of a bribery probe by Chinese authorities, has been hit by a 10% fall in drug and vaccine sales in the United States, driven by competition from generic products.
Core operating profits were 22% lower at €3.7bn in the first six months of the year, with the company warning that earnings per share across 2014 were now likely to be flat rather than the growth of 4% to 8% previously forecast.
Shares slumped 6% on the update as the company also highlighted the impact of the stronger pound on the value of revenues achieved overseas.
Asthma treatment Advair, which is the company’s best-selling drug in the United States, saw sales fall 19% in the second quarter, while the performance of newly launched successors such as Breo has been disappointing.
Chief executive Andrew Witty admitted that managing new product delivery at a time of competition elsewhere in the portfolio was challenging.
However, he added: “This is a critical moment to make the right strategic choices, particularly around investment, for the long-term health of the group and this is reflected in the decisions we have made in the quarter.”
Glaxo is hopeful that a complex three-part transaction with rival Novartis will help boost its fortunes.
The deal unveiled in May will see the two firms create a €8.2bn consumer healthcare powerhouse, with Glaxo’s Aquafresh and Beechams combined with antiseptic range Savlon and cough and cold brand Tixylix from Novartis.
The proposed tie-up also saw Glaxo sell its oncology portfolio and buy the Swiss firm’s vaccines business.
In China, where the company has been rocked by bribery allegations, sales were down 20% in the second quarter.
Authorities in the country have been looking into allegations that Glaxo staff funnelled hundreds of millions of pounds through travel agencies to bribe doctors and health officials.
And in May, the pharmaceuticals firm disclosed that its commercial practices had come under ”formal criminal investigation” by Britain’s Serious Fraud Office.