Improved Glaxo Wellcome performance underwhelms financial analysts
15 Jan 2000
Despite Glaxo Wellcome announcing a 6 per cent improvment in 1996 sales, of £8.34bn, and annual pre-tax profits up 18 per cent to £2.96bn, there were mixed reactions among the financial institutions.
On the day of the announcement (6 March), the GW share price initially dropped because the turnover figure was somewhat below analysts' hopes for £3bn. Later in the day it rallied, after chief executive Sir Richard Sykes calmed market fears of low growth, which he said was only `a worst case scenario'.
Excluding the ulcer drug Zantac, the patent of which expires in July, sales were up 14 per cent. Another of GW's key brands, the herpes treatment Zovirax, also sees its patent expire this year. The market for Zantac faces a tide of generics and its sales declined 14 per cent during 1996.
Sales of `new' products, those launched since 1990, rose by 50 per cent to £2bn. Anti-HIV drug sales more than doubled to £500m and the migraine treatment Imigran grew by 46 per cent, becoming what GW calls a `£500m product'.
Sykes commented: `We are well prepared to manage the inevitable erosion of US sales of Zantac. In 1996, its sales accounted for 23 per cent of turnover; in 1994, that figure was 46 per cent. By mid-1997 it could account for as little as 10 per cent of sales.'
He added that the 1996 merger with Wellcome had created a company with a broad and well balanced portfolio, covering a wide range of therapeutic areas. He forecast `low, single digit growth' for 1997-8, improving in 199 9.
