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New products and vaccines a shot in the arm for GSK

Increasing sales of new products and growing demand for vaccines and consumer healthcare goods helped lift GlaxoSmithKline (GSK)'s sales figures 8 percent in the first quarter to £6.2 billion ($9.1 billion), the company announced Wednesday.

The British drugmaker added that its newly launched respiratory and HIV medicines had offset falling sales of ageing lung treatment Advair.

"We think this is a strong solid quarter for the company, especially because we are seeing good, healthy performance across all three of our businesses — pharma, vaccine and consumer," outgoing chief executive Andrew Witty told CNBC on Wednesday.

However, net profit for the quarter was down 97 percent to £352 million pounds, with earnings per share at 5.8 pence. Both figures reflected the one-off boost last year from of the company's oncology disposal.

Future uncertain

GSK is the U.K.'s biggest pharmaceutical company, with a market capitalization of around £71 billion ($103 billion).

It is a time of uncertainty for GSK, with Witty, a 31-year company veteran, set to retire in March next year.

The company's respiratory division has been under pressure, with sales of its flagship Advair drug at risk from the expected U.S. entry of generic alternatives in 2017.

"When you combine Breo (GSK's newer asthma drug) with our established product, Advair, we have been able to essentially hold our position, despite all the pressure we have been under in that Advair marketplace. That's a huge improvement from the previous two years," Witty told CNBC on Wednesday.

GSK's ViiV healthcare unit, which specializes in HIV treatment, performed well.

"In America alone, our HIV new products sold exactly the same amount as out Advair product in the U.S., so this shows you how quickly the replacement of Advair is taking place," Witty told CNBC.

However, ongoing restructuring savings have driven earnings per share growth lower, following from the company's three-part transaction with rival Novartis last year. (GSK acquired Novartis's global vaccine business and divested its oncology division.)

The company's reputation remains tarnished by a major bribery scandal in China and investors have previously complained about flagging sales and profits.

A GlaxoSmithKline (GSK) office.
ChinaFotoPress | Getty Images

Some such as Neil Woodford, one of the U.K.'s best-known fund managers, have called for GSK's consumer health division to be spun off.

Witty was bullish on the unit's performance on Wednesday, saying it had a portfolio of "extraordinary brands."

He added that GSK's three business lines functioned well together — but conceded there were other ways they might be structured.

"All of these businesses are getting bigger and bigger and it would be wrong to suggest there could not be alternative structures. But in my view — and I think, absolutely the view of the board of GSK — is that over the next few years, the right strategy is the one we are deploying," he told CNBC.

Brexit means... regulation

Witty said that from GSK's perspective, it would be better if the U.K. remained in the European Union (EU). U.K. citizens will vote on whether to leave the 28-country political union and trade zone in a referendum on June 23.

Leaving the EU would fuel uncertainty and create the need for new regulation in the U.K. in place of existing EU rules, Witty said.

"We can't see the value of the uncertainty that would be created from leaving and also the need to create new regulation ... In an area like ours, where we are heavily regulated, that's not necessarily something we think is massively value-added," he told CNBC.

"Certainly from a GSK perspective, we are ready for any outcome, but the best outcome is to remain," Witty later added.

Patenting

Last month, GSK said it would adopt a graduated approach to patenting its medicines, in order to make them more affordable in developing countries. It said it would no longer file patents in the poorest countries, allowing other companies to make cheap copies of drugs without the risk of being sued.

Witty has long proponed improving drug access in poorer countries and this initiative has been seen by market-watchers as one of his last big moves before he steps down.

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