GlaxoSmithKline has reported better than expected quarterly results thanks to strong sales of its flu vaccine and a weaker pound.
The UK’s largest drug company has emerged as a big beneficiary from sterling’s 18% decline since the Brexit vote. GSK generates 96% of its sales overseas but makes many products in the UK, including Sensodyne and Aquafresh toothpastes, at its Maidenhead factory.
Sales rose by 23% to reach £7.5bn in the third quarter. At constant exchange rates, sales were up 8% and earnings rose 12%. Analysts had forecast sales of £7.3bn, according to Thomson Reuters estimates.
Another area where GSK could benefit is “parallel trade,” which involves the shipment of drugs from low-cost countries such as Greece and Spain to countries such as Britain and Germany, where prices are higher.
The outgoing chief executive, Sir Andrew Witty, who will hand over to the company’s consumer healthcare chief Emma Walmsley at the end of March, said parallel trade could “cease in entirety,” depending on the terms of Britain’s exit from the EU.
There had been a decline in parallel trade since the referendum, he said, and “if the pound remains suppressed or at these new lower levels, you would expect to see less import, more export”.
GSK’s vaccine sales exceeded City expectations in the third quarter, in particular flu vaccines, while new HIV and lung medicines also sold well, offsetting declining demand for ageing blockbuster drugs such as Advair for asthma.
Witty said the vaccine business had “never been healthier,” despite the company’s decision to withdraw its cervical cancer vaccine Cervarix from the US market. Shingrix, a new shingles vaccine which is seen as a potential blockbuster with annual sales of more than $ 1bn, has been filed for approval in the US and is due to be filed in the EU before the end of the year.
Witty said after Walmsley’s appointment a month ago, the “feedback from the overwhelming majority of shareholders has been positive and constructive”. “That is the right response, given Emma’s tremendous credentials for this role and her personal passion for GSK,” he said.
Walmsley will be the most powerful woman in the global drugs industry and one of seven female FTSE 100 chief executives. However, her appointment came as a disappointment to some investors who had hoped for the arrival of an outsider to push through a spin-off of the consumer healthcare arm.
Witty said GSK was on track to achieve core earnings growth of 11-12% at constant exchange rates this year, marking a turnaround after several years of poor performance and a bribery scandal in China.
He said the company saw no need to make any contingency plans around immigration after the Brexit vote. EU nationals account for 14% of GSK’s UK based workforce. Witty was optimistic that “ultimately there are going to be some pragmatic decisions made” that would ensure companies were able to attract global talent.
GSK sales rise despite weak pound and Brexit uncertainty
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