GlaxoSmithKline share price plunges following a 14pc fall in profits

Nassos Stylianou
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GlaxoSmithKline share price took a beating today (Source: Getty)

No respite for GlaxoSmithKline.

Shares in the pharmaceutical giant took a drubbing today, plummeting as much as 6.9 per cent after the drugmaker posted a 14 per cent fall in second quarter profits. Shares recovered slightly, closing down around five per cent.

One of its key drugs, Avadir, a treatment for asthma, makes up around 20 per cent of GlaxoSmithKline (GSK) revenues and it was its continued poor sales performance over the last quarter, as well as the effect of a strong pound, that did the damage. Advair sales in the US dived 19 per cent in the quarter ended in June and the company's struggle to defend its respiratory drugs franchise has worried investors.

GSK's quarterly sales were £5.56bn, generating pre-tax profits of £986m. This was down from £1.29 bn for the same period in 2013. Earnings per share plunged 25 per cent to £0.19.

Analysts polled by Thomson Reuters had expected sales of £5.76bn and core earnings per share, which excludes certain items, of £0.21.

The drugmaker also slashed its guidance, affirming that core earnings per share for 2014 was now only expected to be "broadly similar" to last year, adjusting for currency fluctuations. That was down from the four to eight per cent growth predicted in the first quarter.

The results mark yet another quarter of falling profits and, coupled with the revised guidance, chief executive Sir Andrew Witty is under increasing pressure to deliver profit growth.

Investor reaction today is indicative of their frustration with the company that has put off profit growth as it adjusts to increased competition in the respiratory drug market following the loss of Advair's US patent in 2010.

Witty remained optimistic however that GSK would turn it round and return to profit growth, but braced shareholders for a continuation of this transition period..

"Now is the moment to start thinking about what this group looks like post-Advair. We expect the transition of this portfolio to continue over the next two to three years and remain confident that GSK will maintain its leadership position in respiratory well into the next decade," he said.

The company has been engulfed in a major corruption scandal in China, involving the alleged systematic bribing of doctors to ensure the use of GSK product. Sales in China were down 17 per cent.

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