Glaxo re-starts share buyback

City A.M. Reporter
GlaxoSmithKline will start buying back shares again in 2011, demonstrating confidence it has turned the corner following massive legal bills.

Profits at Britain's biggest drugmaker were wiped out in the fourth quarter, as expected, after GSK took a £2.2bn legal charge to settle further Avandia litigation and US investigations into past sales practices.

The decision to push ahead with a £1-2bn buyback programme in 2011 – the first since 2008 – cheered investors and lifted GSK shares more than 3 percent on Thursday.

The grim set of quarterly results, meanwhile, were viewed as broadly in-line, with sales in the three months to December 31 down 11 per cent.

GSK was hit last year by generic competition to herpes drug Valtrex and sliding revenue from Avandia, but the company is further through its "cliff" of patent expiries than some of its rivals and is still generating plenty of cash.

Chief Executive Andrew Witty argued the underlying performance was robust, with full-year 2010 sales excluding Valtrex, Avandia and pandemic flu products up 4.5 per cent.

"I view these results as setting the base for the company and it allows them to return to growth from 2012," said Dominic Valder, industry analyst at Evolution Securities.

"It's going to be roughly speaking a mid-single digit top-line growth story, with a bit of margin expansion and share buybacks leading it to being a high single-digit bottom-line – and that's not in the price at the moment."