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Avandia damages GSK Q3 results

GlaxoSmithKline sees a drop in profit as Avandia-related costs affect the company's third quarter financial results

GlaxoSmithKline (GSK) has seen a drop in profit for the third quarter of 2010, with costs and loss of sales related to restrictions on the use of its controversial diabetes drug Avandia (rosiglitazone) affecting the company's financial performance.

Total profit for the period attributable to shareholders came to £1.29bn – a drop of 3.5 per cent from the same timeframe in 2009.

This affected the company's earning per share (EPS), with the figure decreasing from 26.3p in 2009 to 25.3p in 2010.

Revenue also saw negative growth, with sales falling by 2 per cent at constant exchange rates to $6.81bn.

Avandia, which was suspended in the EU and restricted in the US following safety fears, saw a sales decrease of 65 per cent to £70m. GSK said it expects revenue for the drug to continue to fall in Q4, with 'minimal' sales from the start of 2011.

Herpes treatment, Valtrex (valacyclovir fydrochloride) also saw a significant fall in sales, with generic competition in Europe and the US leading to a 75 per cent loss.

With both drugs performing poorly in the regions, GSK saw lower total pharmaceutical sales in both the US (decreasing by 8 per cent) and Europe (decreasing by 9 per cent).

This was partly offset by strong total growth in other areas however, with revenue in emerging markets increasing by 14 per cent, and vaccine revenue increasing by 19 per cent.

The effects of Avandia restrictions meant more than a loss of sales though, with one-off charges of £82m leading to a fall of 9 per cent in the company's operating profits for the period.

Speaking on the company's performance, Andrew Witty, CEO, GSK, said: "Comparison to high pandemic product sales a year ago and continued sales declines of Avandia and Valtrex impacted our overall sales growth for the quarter. Excluding these three factors, Group sales growth was around 6 per cent and it is worth noting that these particular headwinds will diminish rapidly over the next 12 months.

"This underlying sales growth for GSK is a direct result of the strategy we have been implementing to significantly shift investment and resources to support expansion in key business areas and new products."

Witty also spoke of his confidence in the company's future: "[T]his third quarter marks another positive step forward in execution of our strategy and, despite the challenging environment we face, I remain confident that GSK's outlook continues to improve and that we are well placed to deliver long-term growth and value for shareholders."

21st October 2010

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