Glaxo First-Quarter Profits Down 1%, Hit by Strong Pound

GlaxoSmithKline profits dipped 1% in the first quarter, as sales were hit by the strength of sterling and the loss of patent protection on key medicines, Europe's biggest drugmaker said on Wednesday.

Pretax profits in the three months to March 31 totalled 2.14 billion pounds ($4.3 billion) on sales down 4% at 5.59 billion, equivalent to earnings per share of 27 pence.

The average EPS forecast had been 26p in a Reuters poll of 14 analysts, but the profit numbers were boosted by a one-off gain of 207 million pounds related in part to the settlement with Swiss drugmaker Roche over blood pressure drug carvedilol.

Sales, meanwhile, came in below forecasts of 5.75 billion and Glaxo shares erased earlier gains to stand 0.8% lower at 14.60 pounds.

For the full year, Glaxo maintained its forecast of earnings growth of between 8 and 10% at constant exchange rates. EPS growth in the first quarter advanced 14% on this basis.

“We started the first quarter by being ahead of our guidance, but we are not changing the guidance at this point because it’s a bit early in the year to do so,” Jean-Pierre Garnier, GlaxoSmithKline's CEO, told CNBC’s “Squawk Box” on Wednesday.

He said the company continues to develop promising new products.“It was an exceptionally good quarter from the point of view pipeline news. Several products produced positive clinical data,” Garnier said. “In the last 90 days, we have filed or received approval for ten products which in our business is a record.”

Glaxo's business is at a turning point, with its two biggest sellers -- Advair and diabetes treatment Avandia -- facing a slowdown in growth, while the company hopes to revive its fortunes by bringing new drugs on stream.

The British-based group last month won approval for a novel breast cancer pill called Tykerb and is hoping for a green light later this year for cervical cancer vaccine Cervarix, taking it deeper into the fast-growing oncology field.

Garnier said the company was making good progress on getting its new products to market, with 10 filed, approved or launched in the first quarter of 2007.

Worries over existing medicines and uncertainty about prospects for the pipeline mean Glaxo shares trade at a discount to the sector. The stock fetches around 14.5 times forecast 2007 earnings, against an average for the European healthcare sector of 17, according to Reuters data.