Strong growth in new products helped pharmaceuticals giant GlaxoSmithKline (GSK) deliver an encouraging set of results for the third quarter.
GSK's sales grew four per cent, or two per cent at constant exchange rates, to £7.8bn in the quarter, boosted by demand for new HIV and respiratory drugs. New product sales totalled £1.7bn, up 44 per cent from the previous year.
Sales at the firm's pharmaceuticals and consumer healthcare divisions grew, but vaccine sales were flat.
The company posted an adjusted pre-tax profit of £2.3bn, up seven per cent, or five per cent at constant exchange rates.
Guidance for 2017 adjusted earnings per share growth was maintained at three to five per cent after it was lowered earlier this year.
Shares in the FTSE 100 firm dipped 1.19 per cent to 1,494.5p in afternoon trading.
Why it's interesting
Growth in newly launched drugs more than offset declines in older ones, and GSK's pharmaceuticals unit was also helped by rivals' failures to bring a generic competitor to the firm's Advair inhaler to the US market.
The group also won key approvals from the US Food and Drug Administration (FDA) for its shingles vaccine Shingrix and its chronic obstructive pulmonary disease drug Trelegy Ellipta.
Chief executive Emma Walmsley, who has been in the role for about six months after leading the company's consumer unit, set out plans earlier this year to shave off more than 30 pre-clinical and clinical programmes, and consider selling its rare diseases unit after a strategic review.
"There’s no new news, nor was any expected, on strategy, dividend policy or the ongoing level of restructuring efforts," said Steve Clayton, manager of a Hargreaves Lansdown fund that holds a 4.7 per cent stake in GSK.
Simon Gergel chief investment officer of UK equities at Allianz Global Investors, said:
The group’s strategy of having a diversified portfolio of pharmaceuticals, vaccines and consumer healthcare businesses continues to make sense, at a time when there are significant pricing pressures in the traditional pharmaceutical industry.
Shares in the company dropped after Walmsley told reporters GSK will look at acquisition options to bulk up its consumer health business as investors feared a dividend cut.
What GSK said
Performance in the quarter showed continued progress with sales growth and improved operating margins. This was driven by targeted cost savings and restructuring and integration benefits, which particularly benefited vaccines and consumer healthcare, and also supported investment in our new products and R&D [research and development] pipeline.