GSK reports underlying sales growth of 4% in 2011 (February 7th 2012)
GlaxoSmithKline Plc reported an underlying sales growth of 4% in 2011 and improved pharmaceutical productivity, as the effects of a multi-year restructuring programme and a new R&D strategy started to deliver results.
In a teleconference with journalists on 7 February, Andrew Witty, the chief executive, said the company “is a different place to where it was three and one-half years ago” with a business that is exposed to multiple sources of growth including the emerging markets, consumer healthcare and Japan.
He also highlighted the company’s pharmaceutical pipeline where data on nine Phase 3 medicines were reported over the last 12 months and three new products received regulatory approval in the US. These products are Benlysta for lupus, Trobalt for a form of epilepsy and Horizant for restless legs syndrome. Mr Witty said that four more medicines and vaccines are ready for registration filings this year including a new MEK inhibitor for melanoma. This drug recently achieved its primary endpoint in a Phase 3 study.
“Following the recent review of our discovery performance units, we now believe that we can progress up to 30 more assets into late-stage development over the next three years. I believe that this is a very positive signal for the long-term strength of the company,” he told journalists.
On a reported basis, without any adjustments, GSK’s turnover was down by 3% in 2011 to £27.4 billion. Pharmaceutical and vaccine sales declined by 4% to £22.2 billion while consumer healthcare sales rose by 5% to £5.2 billion. Excluding sales of pandemic influenza vaccines; the diabetes drug Avandia and the anti-viral Valtrex, sales grew by an underlying 4%. The underlying figure is an adjustment to illustrate the diminishing importance of these products to the group as a whole.
Geographically, sales increased by double-digit figures in the emerging markets, Japan and the Asia Pacific region but were flat in the US and declined by 4% in Europe. Sales of new products were up by 47% to £2.5 billion.
GSK reported an operating profit before charges for restructuring of £8.4 billion, a 65% increase in constant exchange rates from a year earlier as a result of lower legal costs. R&D spending was flat at £3.9 billion, or 14.3% of turnover, compared with 14% of turnover a year earlier. The company identified an additional £300 million in annual savings with the result that its restructuring programme is now expected to deliver £2.8 billion in annual savings by 2014.
Improvements in R&D productivity have been driven by the creation in 2008 of discovery performance units, which comprise five to 70 scientists apiece and which focus on particular diseases and pathways. Significantly, the company reported an increase in its projected rate of return on recently launched and late-stage projects. This R&D rate of return is now 12%, up from 11% in 2010. The long-term goal is to raise this figure to about 14%.
GSK completed £2.2 billion of share repurchases in 2011 and is currently targeting repurchases of £1-2 billion in 2012. It is proposing a fourth quarter dividend of 21 pence per share resulting in a full-year dividend of 70 pence per share, up by 8%.
Mr Witty said management expects the “core operating margin to begin to improve gradually in 2012; a few tens of basis points with further improvements over the next two to three years.”
Copyright 2012 Evernow Publishing Ltd
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