Glaxo's Second Quarter Results Hit By Legal Charge, Generics

21st Jul 2010 12:23

By Sten Stovall Of DOW JONES NEWSWIRES LONDON (Dow Jones)--GlaxoSmithKline PLC (GSK, GSK.LN) Wednesday missed earnings forecasts for the second quarter as continued strong sales of new products and its pandemic flu vaccine and further expansion in emerging markets was offset by generic competition and a legal charge taken to meet litigation costs. Andrew Witty, Glaxo's chief executive officer, said in a statement: "For the quarter, GSK sales were impacted by several individual factors and adverse prior year comparisons. For example, we saw an acceleration of generic competition to Valtrex in the USA and temporary suspension of Rotarix in the quarter." The company has been restructuring since Witty took the helm in April 2008, cutting costs and simplifying its structure. Witty said the U.K.'s biggest drug maker is "making good progress to build our group of healthcare businesses which offer sustainable growth and have complementary risk/value profiles. At the same time, we have also taken action to drive improved returns on invested capital in our core R&D operation." In the three months to end-June, Glaxo's net profit, before major restructuring, plunged to GBP130 million from GBP1.57 billion in the same period a year earlier. A poll of 13 analysts had foreseen unadjusted net profit declining to GBP1.40 billion. Post-restructuring, the company posted a net loss of GBP304 million. Sales climbed 4% to GBP7.02 billion, beating analysts' forecasts of GBP6.98 billion for the latest quarter. The analyst survey was conducted before Glaxo's surprise announcement last week it was taking a charge of GBP1.57 billion in the second quarter to cover costs of settling legal disputes involving antidepressant Paxil, its diabetes drug Avandia, and a U.S. government investigation of a Glaxo factory in Puerto Rico. Second quarter earnings per share before major restructuring slid to 2.6 pence from 31 pence a year earlier. Before news of the legal charge, analysts polled by Dow Jones had forecast second-quarter unadjusted EPS of 27.66 pence. Glaxo will give a live webcast at 1300 GMT Wednesday and investors will be watching keenly for comments on the U.S. market. Glaxo does not forecast its earnings. -By Sten Stovall, Dow Jones Newswires; +44 207 842 9292; [email protected] (END) Dow Jones Newswires July 21, 2010 07:23 ET (11:23 GMT)