Glaxosmithkline Q3 results

9:16 a.m. Fri 28 Oct 2005

Glaxosmithkline continued the reasonable level of underlying growth which we saw earlier in the year with sales up 9% and EPS up 16% (both at CER). Glaxosmithkline has raised its official earnings guidance for the year to "mid-teens" EPS growth. The company also accidentally disclosed an internal estimate of 79.9p (17%). This close to most analysts estimates and, despite Glaxo's caution, the best estimate available for the full year.

Paxil sales have yet to recover from the effects of the production problems earlier in the year, and Paxil CR (the in patent version) sales are down 77% year on year. This is disappointing for Skyepharma as well as Glaxosmithkline.

The growth was driven by a number of of drugs including Sere tide/Advair (Glaxo's best selling drug, which generates 13% of sales). There were no unexpected or serious declines in sales. The fall in sales of the older version of anti-depressant Wellbutrin was more than offset by growth in sales of the (in-patent) controlled release version.

At 1466p Glaxosmithkline is trading on 17× next year's earnings, a significant premium to Astrazeneca which is on 9× next year's earnings. Although Glaxo has more long term growth drivers than Astrazeneca, its current growth is slower. Our reservations about major pharmaceutical companies apply to both and investors should consider smaller specialist pharma and biotech companies.