Wednesday 8 February 2017 4:47 pm

Weak pound delivers earnings boost for GSK

GlaxoSmithKline (GSK) has reported core profits of £7.8bn on full year revenues of £27.9bn in 2016, a rise of six per cent and 14 per cent respectively year-on-year.

In the three months to December, GSK saw sales increase by 21 per cent to £7.59bn, beating analysts' expectations. The reported core earnings per share were 102.4p for 2016, up 12 per cent on the year.

But Glaxo’s shares fell by 1.22 per cent on Wednesday afternoon as the company warned on the potential threat to earnings from competitors to their highly profitable Advair drug, which is used to treat asthma attacks.

"Clearly, this year we face some uncertainty as to the level of our earnings performance, given the possibility of substitutable generic competition to Advair in the US," GSK CEO, Sir Andrew Witty said.

Glaxo has advised that it expects revenue from Advair could fall from £3.5bn in 2016 to £1bn in 2017. Advair lost patent protection back in 2010 but serious competitors to the popular respiratory drug has yet to emerge until now.

The unveiling of last year's results represent Witty's swansong as CEO. Emma Walmsley, currently GSK’s consumer and healthcare lead, is due to take over from him on 31 March this year. Witty faced a challenging tenure as CEO but has won plaudits in some circles for cutting back GSK’s drug costs in the world’s poorest countries to no more than 25 per cent of their value in the UK.

“Consensus beating results for 2016 have been overshadowed by the potential impact of generic competition in the US,” Nicholas Hyett, an equity analyst at Hargreaves Lansdown, said.

“The group sees US sales of its Advair respiratory drug declining by 45 per cent in the event that competition appears in mid-2017. That would leave GSK’s earnings standing still this year, as it struggles to make up the difference from other products.”

A weaker pound was credited with the results at the FTSE 100 listed firm, which derives most of its revenue from other currencies. Strong sales of the company’s new medicines are also responsible for the positive figures. GSK saw new pharma and vaccine product sales double to £4.5bn in 2016, while the company’s vaccine business grew by 12 per cent in the year.

The world’s sixth largest pharmaceuticals company, GSK is based in Brentford, London and employs around 96,500 people worldwide.

"This quarter marks the last I will report to shareholders after nearly 10 years as CEO and more than 30 years as an employee,” Witty said.

“GSK is a very special company that touches people's lives across the world and I feel enormously privileged to have had the opportunity to lead it. I would like to thank all of GSK's employees, partners and shareholders for their support to build a company that delivers strong financial performance and meaningful contributions to society."