Glaxosmithkline Q1 results

8:57 a.m. Mon 02 May 2005

Sales growth in the US was almost wiped out by the interruptions to the supply of Paxil CR (due manufacturing quality problems), but this is a short term problem and underlying growth was strong with sales (excluding the impact of Paxil CR problems) up 13% in the US and 10% in Europe. In general Glaxosmithkline has continued last year's trends have continued but with growth stronger as the worst of the declines in two key drugs now appear to be behind Glaxosmithkline. Of course the disruption to Paxil CR sales significantly distorts and obscures the picture.

There are no significant surprises on the pipeline and product launches. In the short term Glaxosmithkline's product launches remain on track.

The effectiveness of Glaxosmithkline's efforts to defend revenues with new versions of drugs now subject to generic competition is obscured by the problems with Paxil, however Paxil CR (the, new, in patent, extended release version) has appeared to be gaining reasonable market share, While Wellbutrin XL (also a newer in-patent version) is gaining significant market share but is currently offsetting only about a third of the decline in sales of older versions.

The 17× prospective PE and the 3.2% yield (1312p) are reasonable, although obviously Glaxosmithkline does not have the growth potential (or potential upside to the share price) that smaller players in the sector do, but on the other hand Glaxosmithkline has a high proportion of comparatively stable revenues.