GSK profit falls short as cheap competition hits older drugs

By Pushkala Aripaka and Ankur Banerjee

(Reuters) - GlaxoSmithKline <GSK.L> missed fourth-quarter earnings forecasts on Wednesday as cheap competition to the British drugmaker's respiratory medicines offset strong growth in sales of its shingles vaccine.

GSK shares fell as much as 3% after the company also said adjusted earnings for this year could fall as much as 4%.

Under Chief Executive Emma Walmsley, the London-listed firm has sold several assets, and bought others in fast-growing markets such as oncology, to try to rejuvenate growth as several of its older drugs face losing patent protection.

On Wednesday, the company said it would look at selling more non-core assets, starting with a review of its prescription dermatology business.

It also launched the two-year programme to split into two entities following the merger of its over-the-counter products business into a venture with Pfizer <PFE.N>.

Vaccines and prescription treatments including for HIV will play a larger role in driving GSK's growth going forward as older treatments, including asthma drug Advair, face competition from generic medicines.

"Once a patent expires rivals pile in, forcing the incumbent to cut prices even as volumes tumble and the result is always painful," said Nicholas Hyett, an equity analyst at Hargreaves Lansdown.

GSK, which has about 3,000 employees in China, said its forecast for the current year did not include any potential impact from the coronavirus outbreak that has killed nearly 500 people in China.

(Graphic: GSK forecasts 2020 profit decline - https://fingfx.thomsonreuters.com/gfx/editorcharts/GSK-RESULTS/0H001R89BBRT/eikon.png)

"It is just really too early to say," Walmsley said on a call with journalists.

GSK echoed rival Novartis <NOVN.S> by saying it had not faced much disruption in the short term to its supply chain, but was monitoring the situation and had suspended all non-critical travel to China at least until mid-February.

The company expects 2020 adjusted profit to fall by 1% to 4% at constant exchange rates after 2019 adjusted earnings rose 1% to 123.9 pence per share.

Analysts currently expect a 3.8% drop in 2020 adjusted profit, according to a consensus https://www.gsk.com/en-gb/investors/analyst-consensus/analyst-consensus estimate compiled by the company.

GSK's sales rose 11% to 8.90 billion pounds ($11.6 billion) in the three months ended Dec. 31, while adjusted earnings were 24.8 pence per share. Both numbers missed consensus https://www.gsk.com/en-gb/investors/analyst-consensus/analyst-consensus forecasts.

Divestment proceeds from older products should be about 1.6 billion pounds, enough to cover the cash costs of its restructuring programme, GSK said.

Pharmaceuticals sales in the fourth quarter fell 4% to 4.56 billion pounds, including HIV sales of 1.26 billion. Vaccines turnover grew 21% to 1.74 billion pounds, as sales of shingles vaccines Shingrix more than doubled.

(Reporting by Pushkala Aripaka, Ankur Banerjee and Aakash Jagadeesh Babu in Bengaluru and Ludwig Burger in Frankfurt; Editing by Bernard Orr and Mark Potter)