Swine flu vaccine boost for drug giant

Bumper sales of swine flu vaccine boosted GlaxoSmithKline's first-quarter earnings by 17 per cent, more than expected, and the drugmaker reassured investors it could absorb the cost of US healthcare reform.

The rest of 2010 will be tougher, as sales of H1N1 vaccines and flu drug Relenza wane and the group faces accelerating erosion in sales of antiviral Valtrex when multiple generics enter the US market.

Chief Executive Andrew Witty said he was encouraged by underlying revenue growth of 4 per cent, excluding pandemic flu products, which reflected success in diversifying into emerging markets and consumer health.

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Sales from conventional "white pills" in Western markets accounted for just 27 per cent of first-quarter sales, down from 32 per cent a year ago.

As a global player, Glaxo faces pressure from government healthcare reforms and price cuts – not just in the United States but also Japan and Germany.

Some of its US rivals, notably Eli Lilly, have warned that President Barack Obama's healthcare reforms will hit earnings in 2010 and 2011.

But Mr Witty said Glaxo had been able to absorb the adverse impact in the first quarter and expected to offset any further hits through an ongoing internal efficiency drive.

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Unlike many other large drugmakers, Glaxo does not give explicit guidance on sales and earnings.

Pretax profit was 2.23bn, equivalent to earnings before major restructuring up 17 per cent at 30.7 pence per share as sales rose 9 per cent, to 7.36bn.

Sales of pandemic H1N1 flu shots were 698m, ahead of analyst expectations of around 550m.

For the year as a whole, Mr Witty said he expected sales would be in line with the 883m sold in 2009.

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