(Sharecast News) - GlaxoSmithKline tightened up its full year guidance after a strong launch for its new Shingrix shingles vaccine helped the drug maker to a stronger than expected third quarter.
Sales of £8.1bn were generated in the three months to end-September, up 3% on the same period last year or 6% if currency swings are ignored.
City analysts had expected revenues of £8.0bn. Earnings of 28.8p per share were up 16% at on a reported basis and 23% at constant currency rates, while adjusted EPS of 35.5p were up 10% or 14% at constant rates, beating the average analysts forecast of 33.3p. Chief executive Emma Walmsley lifted the drug developer's guidance for full-year adjusted EPS growth to 8-10%, from her former 7-10% indication, even if a generic competitor to Advair is launched in the US before the end of the year.
Some generic competition in Europe eroded sales of Advair/Serotide, but the company said this was offset by growth in new respiratory products. "This revised guidance primarily reflects an increase in our expectations for sales of Shingrix, which we now expect to be £700-750 million in 2018," she said, after Shingrix pulled in sales of £286m in the quarter. Foreign exchange rates are expected to have a 6% negative impact on adjusted EPS for the full year, if rates continue around their current rates for the rest of 2018, with a 3% impact on sterling turnover growth. Walmsley hailed the sales growth in all three businesses, with improvements in underlying group operating margin thanks in part to an "effective focus on cost control". "Looking further ahead, we remain confident in our ability to deliver the Group outlooks for sales and EPS growth we previously set for the period 2016-2020." Shares in GSK, already up 16% this year, jumped a further 2.7% to 1,579.8p after the results were released midway through Wednesday's session. "GSK's third-quarter earnings report contained few pointers on the two factors that could result in a longer-term re-rating of the stock," said Andy Smith, analyst at Edison Investment Research, looking for more information about the boosted consumer healthcare spin-off and prospects of the pharmaceutical pipeline. "The latter is much more longer-term and still a work in progress with recently-appointed R&D head Hal Barron still finding his feet in a role that has historically been a bit of a poisoned chalice to previous incumbents." Looking at a potential consumer healthcare spin-off, Smith conceded it "might not be a logical step" after GSK took full-ownership of the Novartis joint venture. During the summer Walmsey said the consumer business provided Glaxo with "more stability in our earnings and helps in free cash flow generation", after the Financial Times reported that the group's chairman Philip Hampton was considering a spin-off following pressure from investors.
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