Glaxo cuts outlook as lung drug struggles in the US

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GlaxoSmithKline cut its 2014 outlook after sales fell by a worse-than-expected 13 per cent in the second quarter as its all-important lung drugs struggled in the United States and a strong pound took a bite out of growth.

A run of weak quarters highlights the pressure on chief executive Andrew Witty, whose drive to reshape Britain’s biggest drugmaker has yet to deliver the hoped-for return to sustained revenue growth, following a lengthy period of patent expiries.

The company is also mired in a serious corruption scandal in China, where it has been accused of paying bribes to doctors to use its medicines.

Quarterly sales totalled £5.56bn, generating ‘core’ earnings per share down 25 per cent at 19.1p, the drugmaker said yesterday.

Analysts, on average, had forecast sales of £5.76bn and core EPS, which excludes certain items, of 21.3p.

The company pared its outlook for the full year, predicting core EPS would be “broadly similar to 2013” in constant exchange rate terms. Previously, it had been hoping to increase 2014 EPS by between 4 and 8 per cent.

A big concern for GSK investors is its reliance on the inhaled lung drug Advair, which makes up nearly a fifth of sales. It already faces competition from copycat versions in Europe, with generics in the United States perhaps a couple of years away.

GSK is hoping two new inhaled respiratory medicines – Breo and Anoro – will fill the gap but their uptake so far has been slow, disappointing many analysts who follow the company.

Although it has put the worst of its patent losses behind it, GSK still faces challenges in some areas, including the launch of a generic version of heart pill Lovaza in the US market in April.

Witty joined the deal-making bandwagon sweeping the healthcare sector in April by trading more than $20bn of assets with Swiss rival Novartis in a complex three-part transaction designed to make the group more focussed.

But the GSK boss has eschewed full-scale mega-mergers, arguing they are distracting and disruptive to the company’s research and development activities.