Thursday, October 27, 2016


GlaxoSmithKline lays plans to secure post-Brexit supply chain

Weak pound helps third-quarter sales surge 23%
© Bloomberg
UK drugmaker GlaxoSmithKline is drawing up contingency plans to secure its supply chains after Brexit, prompted by concerns over disruption as a result of any trade settlement between Britain and the EU.
During a call to discuss GSK’s third-quarter results on Wednesday, outgoing chief executive Sir Andrew Witty said the terms on which the UK leaves the EU would have a “fundamental effect” on the company’s operations. But he did not spell out the steps the group might take.
“It is too early to make a definitive choice but we are spinning up the various responses that we would have to take under whichever scenario ultimately plays out over the next few years,” Sir Andrew said.
GSK’s chief executive, who is due to step down early next year after a decade at the helm of Britain’s biggest pharmaceuticals company, said he has fewer concerns about controls limiting the ability to hire staff from the EU.
“I remain optimistic that ultimately there are going to be some pragmatic decisions made here which ensures that companies are able to really access the best talent,” Sir Andrew said.
Despite concerns over Brexit, GSK posted third-quarter results showing that its recovery is continuing as it benefited from the slide in the pound.

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Group sales surged 23 per cent higher compared with the same period last year to £7.54bn, ahead of analyst expectations of £7.27bn. At constant exchange rates, the rise was a more modest 8 per cent.
Core operating profit for the three months to September 30 rose 35 per cent, or 12 per cent at constant currencies, to £2.3bn.
The strong growth came across all three divisions at GSK, “but primarily from the momentum of new pharmaceutical and vaccine products”, Sir Andrew said.
The drugmaker is emerging from a difficult few years in which sales and profits were hit hard by the decline of its blockbuster drug Advair, a treatment for severe asthma.
GSK has identified 11 new products that it says will bring sales of £6bn a year by 2018. It said on Wednesday that new drugs including — Tivicay for treating HIV and the Menveo vaccine for meningitis — now account for a quarter of pharmaceutical revenues, up from 14 per cent in the same period last year. Revenues from new drugs and vaccines rose 79 per cent in the quarter to £1.2bn.
Core earnings per share at 32.2p were up 12 per cent at constant exchange rates compared with the same period last year, and well ahead analysts’ consensus of 29.4p.
The drugmaker confirmed its target for full-year core earnings per share growth of 11 to 12 per cent at constant currencies.
GSK said its consumer healthcare division, which includes “power brands” Sensodyne and Voltaren, posted sales of £1.9bn, a 5 per cent increase year on year in a market that Sir Andrew said was growing at about 3.5 per cent.
Analysts at Hargreaves Lansdown said that although at current rates the pound would boost full-year EPS by 21 per cent, there was a “dark side” to the currency swing because GSK borrows in dollars as well as pounds, increasing debt costs by £1.4bn.
Shares in the group closed slightly down at £16.26.