European austerity, falling sales drive GlaxoSmithKline Q3 profit down 18

LONDON – Drug company GlaxoSmithKline saw its third-quarter fall by nearly a fifth as sales fell in Europe and the United States.

GSK reported Wednesday that its net profit declined 18 percent to 1.12 billion pounds ($1.8 billion) in the three months ending Sept. 30, from 1.38 billion pounds in the same period last year.

Revenue fell 8 percent to 6.5 billion pounds with sales 9 percent lower in Europe, where the company faced pricing pressure from government austerity drives. U.S. sales fell 6 percent because of generic competition, the end of a co-promotion agreement for incontinence drug Vesicare and declining sales of Avandia for diabetes.

Avandia was banned in Europe in 2010 and sales were severely restricted in the United States after it was found to sharply increase the risk of heart attacks and congestive heart failure. In July, GSK agreed to pay $3 billion to settle a criminal and civil liability claims by the U.S. government and several states.

Sales in emerging markets rose 11 percent — led by a 16 percent advance in the Middle East and Africa — and overtook Europe as the company's biggest market in terms of revenue.

The company raised its quarterly dividend by 6 percent to 18 pence.

However, GSK shares were down 0.7 percent at 1,410 pence at midday.

"The group's results have again failed to inspire," said Keith Bowman, analyst at Hargreaves Lansdown Stockbrokers. "Europe continues to weigh, whilst hoped-for new product sales are yet to compensate for disposals and tough comparatives."

Chief Executive Andrew Witty was optimistic of prospects for new drugs in development. The company expects to begin regulatory filings around the end of the year for respiratory medicine LAMA/LABA, HIV drug dolutegravir and diabetes medicine albiglutide.

"With sales contributions from new products, together with further cost discipline, we remain confident that we can drive improvements in core operating margin over the next few years," Witty said.

He added that "absent a further deterioration in Europe, we now expect sales for the year to be broadly in line with 2011 on a constant currency basis."

During the quarter, GSK completed the acquisition of Human Genome Sciences, based in Rockville, Maryland, for 2.5 billion pounds, and expects to spend 233 million pounds on restructuring.

The company has spent 1.9 billion pounds on share repurchases this year, and expects the full year total to be as much as 2.5 billion pounds.