Glaxo meets forecasts as profits rise 16%

GLAXOSMITHKLINE met forecasts with a 16% rise in 2006 profit yesterday and said a dip in growth this year as some old products go off patent would be less than feared.

Europe’s biggest drugmaker, employing 1,600 people in Ireland, said earnings per share at constant exchange rates were expected to rise between 8% and 10% in 2007, better than the low single-digit level many analysts had expected.

“Management guidance for 2007 was key and this has surprised on the upside,” said Keith Bowman, an equity analyst at stockbroker Hargreaves Lansdown.

Currency effects, however, may knock back the reported growth rate and chief financial officer Julian Heslop said there would be a hit of 4% if dollar and euro rates seen in the fourth quarter of 2006 persisted throughout 2007.

Even without currency headwinds, Glaxo was always facing a tough year due to generic competition to both anti-nausea drug Zofran and anti-depressant Wellbutrin XL in the US and the appearance of new rivals for top sellers Advair and Avandia.

But Nomura Code analyst Mike Ward was reassured that Glaxo’s big pipeline of new drugs was progressing without any of the setbacks that accompanied quarter three results.

Glaxo said pretax profit was £7.8bn (€11.7bn) in 2006 on sales of £23.2bn, equivalent to earnings per share of 95.5 pence, in line with the average forecast in a Reuters poll of 19 analysts.

Income in the fourth quarter was held back by a weak dollar, reflecting the importance of the US pharmaceuticals market to the British-based firm.

This is the last full year for chief executive Jean-Pierre Garnier, who is due to retire in May 2008, and it will be important for proving the credibility of Glaxo’s extensive new drug pipeline.

The group plans to launch five new products in 2007, including breast cancer drug Tykerb and cervical cancer vaccine Cervarix in Europe. In the United States, Cervarix is on track to be filed for approval by April.

Both products are central to Glaxo’s expanded presence in the fast-growing oncology field, but they will have only limited impact on 2007 results.