Glaxo 2nd-Half Net Rises 25% on Growth in New Drugs (Update2)
Bloomberg News
February 18, 1999, 6:44 a.m. ET
Glaxo 2nd-Half Net Rises 25% on Growth in New Drugs (Update2)
(Adds investor comment in 9th paragraph, details from 10th.)
London, Feb. 18 (Bloomberg) -- Glaxo Wellcome Plc, the
world's second-biggest drugmaker, indicated second-half profit
rose 25 percent, more than expected, as gains in respiratory and
other drugs outweighed lower sales of two former best sellers
whose patents expired in 1997.
Glaxo, the world's biggest maker of asthma, AIDS and
migraine drugs, indicated second-half profit rose to 1.01 billion
pounds ($1.65 billion), or 28.1 pence a share, from 805 million,
or 22.6 pence, a year ago. Sales rose 6.4 percent to 4.12 billion
pounds.
Asthma-drug sales alone grew 24 percent in constant-currency
terms in the whole of 1998 to 2.2 billion pounds, as newer drugs
like Flixotide, Serevent and Flixonase entered the growing, $12
billion asthma market. That did much to offset declines for
Glaxo's former mainstays, the ulcer drug Zantac and the herpes
drug Zovirax.
''This is a really good performance and certainly above our
expectations,'' said Stephen Ewing, an analyst at WestLB Panmure.
He said the biggest surprise was sales growth in respiratory
drugs, which make up 27 percent of Glaxo's drug portfolio. ''We
were looking for 17 percent growth,'' said Ewing.
Glaxo shares rose as much as 85 pence, or 4.3 percent, to
2,078p.
Second-half figures were calculated by Bloomberg News from
Glaxo's reports. The company didn't disclose second-half
earnings.
Glaxo said seven major drugs, as well as its portfolio of
migraine and HIV drugs, grew at double-digit percentage rates in
the full year. Zantac sales, on the other hand, fell 42 percent
to 757 million pounds last year, after competing drugmakers
started selling rival versions of the product, as typically
happens when patents on popular products expire.
Earnings Growth Seen
Glaxo reiterated a promise of strong growth this year,
fueled by new product introductions. It said it expects to post
double-digit sales and earnings growth in 1999 at constant
exchange rates. Achieving that would put it in line with such
leaders as Pfizer Inc., Merck & Co. and others.
''We keep buying the shares,'' said Walter Brandstaetter,
who helps manage $9.8 billion at DG Bank Luxembourg SA. ''They
have a good product range and a strong market position. They will
also be in the forefront of merger activity to come.''
Glaxo said revenue from Zantac, which once made up 42
percent of its overall sales, ''started to stabilize,'' falling
to 375 million pounds in the second half, only 2 percent less
than in the first half. It is sold both as an over-the-counter
product, competing with Merck & Co.'s Pepcid and SmithKline
Beecham Plc's Tagamet, and against prescription remedies for
stomach ailments.
Zovirax Declines
Zovirax -- the herpes drug Glaxo acquired in 1995 with its
$14.7 billion takeover of Wellcome Group Plc -- fell 27 percent
to 403 million pounds. Zovirax, which competes with SmithKline's
Famvir and generic drugs, was once Glaxo's second-biggest seller.
Pretax profit for the year dropped a smaller-than-expected 1
percent to 2.67 billion pounds. Analysts were anticipating pretax
profit of 2.52 billion, according to a Bloomberg survey of seven
analysts.
''It is testimony to the depth and vitality of our portfolio
of medicines, particularly in the disease areas of respiratory,
anti-virals and the central nervous system, that we have been
able to absorb the largest single patent expiry our industry has
ever seen,'' said Chairman Richard Sykes. In 1996 Zantac was the
world's biggest-selling prescription drug.
The company said it will raise its annual dividend 3 percent
to 36 pence a share for 1998, as expected.
John Coombe, finance director, said the company posted a
pretax gain of 70 million pounds in 1998 to account for tax
changes allowing for faster depreciation of a 175 million-pound
software investment.
''The earnings are a bit better than people were
anticipating,'' said Coombe. ''We have outperformed the analysts'
expectations. We are confident in the future.''
New Drugs
Coombe said Glaxo is still on track to launch five major new
drugs this year: Seretide for asthma, Relenza for influenza,
Ziagen and Agenerase for HIV and Zeffix for hepatitis B. Ziagen,
Seretide and Zeffix have already gone on sale in some countries.
Coombe declined to say whether the company considered
bidding for Zeneca Group Plc, the rival U.K. drug company that
today is seeking its shareholders' approval to buy Sweden's Astra
AB for $37 billion in stock. He said, though, that he expects
consolidation to continue in the $244 billion global
pharmaceutical industry.
''We have to see what the competition does,'' said Coombe in
an interview. ''We are keeping our eyes open.''
Glaxo also said its dispute with the U.K. authorities over
transfer taxation ''is close to resolution,'' although its
disagreement with U.S. tax authorities are still far from being
resolved.
U.K. tax authorities have contended that Glaxo misstated
profit in low-taxation principalities such as Singapore to avoid
higher U.K. tax rates, a charge Glaxo denies. U.K. tax
authorities have said the claims involve several hundred million
pounds.
''At present there is a wide variation between the claims of
the (U.S.) authorities and the group's estimation of tax
liabilities,'' said Glaxo.
--Dane Hamilton in the London newsroom (44-171) 330-7727, with
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