£4bn boost for GSK investors

12 April 2012

GLAXOSMITHKLINE is to hand back up to £4bn to its investors through a giant share buyback. Europe's biggest drugmaker, posting third-quarter profits in line with City forecasts, has also recommitted itself to earnings targets this year and next.

Profits climbed 17% to £1.35bn for the three months ended September, on sales ahead 13% at £5bn. Earnings per share climbed 20% to 15.8p.

'GlaxoSmithKline had a strong third quarter, delivering sustained growth across all regions,' said chief executive Jean-Pierre Garnier. 'We are on track to deliver our earnings per share growth target of around 13% at constant exchange rates for the year and remain confident we will achieve our earnings guidance for 2002 of mid-teens earnings per share growth at comparable exchange rates.'

The shares fell 26p to 1880p in early afternoon trade.

Garnier said the buyback move would be 'a great investment', adding the firm had a 'very, very good cash position right now'. Glaxo said the exact amount and timing of share purchases would be determined by market conditions.

The group, created by last year's merger between Glaxo Wellcome and SmithKline Beecham, credited the third-quarter performance to strong sales of drugs to treat asthma and diabetes. Total sales climbed 14% in the US, 8% in Europe and 18% in the rest of the world. New product sales climbed 59% to more than £1bn.

Garnier said there had been dip in business immediately after the 11 September attacks in the US. 'It is early days. We have seen a slowdown just following 11 September in the US - in other words, people were extremely shocked and stayed away from visiting their physicians.' However, he said business was now looking as though it was getting back to normal.

He also quashed reports of a rush on anti-depressant drugs in the US following the attacks. 'There is no sign of every American consumer rushing to get a prescription of Paxil (Glaxo's antidepressant drug),' he said.

Buttressed by a strong franchise in respiratory medicine, there is little that can blow GSK off track this year or next. But analysts say GSK needs to fill out its pipeline of new products to avoid a slowdown in growth beyond 2003. That gap was highlighted by news that GSK is discontinuing development of an experimental drug for type 2 diabetes, which had reached the final stage of testing.

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