GlaxoSmithKline blames harsh pharma "environment" for 2nd-qtr sales and EPS decline

UK pharma giant GlaxoSmithKline (LSE: GSK) posted a downturn in second-quarter 2012 turnover, which fell 4% (-2% at constant exchange rates) to £6.46 billion ($10.1 billion), with growth from key investment areas offset by pressure on mature products in the USA and Europe, and the results reflected challenging macro-economic environment, genericization and discontinuation of certain product, the company said yesterday.

Core operating profit for the quarter came in at just over £2 billion, down 8% (-7% at CER), or 26.4 pence. Operating profit was £1.74 billion, down 2% (-1% at CER) the company stated. However, GSK reported an after-tax profit of £1.25 billion, up from £1.1 billion in the year earlier quarter, reflecting a tax rate of 15% compared with 28% a year earlier. GSK’s shares were down 1.6% at £14.22 in afternoon trading yesterday, closed the day down 1.3% at £14.27.

The decline in European sales was almost entirely due to governments cutting the price they pay for drugs, with sales volumes dropping just 1% during the quarter. GSK had initially forecast a growth in sales this year and Sir Andrew Witty, chief executive, said the company is “disappointed that it is not growing as fast as we hoped at start of the year.” However, he added: “I am very much of the view that this is a delay rather than a change in shape of the curve.”