GlaxoSmithKline Hurt by Generics

Generic competition continues to hurt profit and sales at GlaxoSmithKline (GSK - Cramer's Take - Stockpickr), which saw second-quarter income drop 13% year over year as sales of its blockbuster antidepressants posted double-digit percentage declines.

GlaxoSmithKline, which releases results in British pounds, announced second-quarter net income came in at 1.63 billion pounds, or 20.1 pence, which is equivalent to $3 billion U.S., or 36 cents a share. But slumping sales of Paxil and Wellbutrin lowered results by 13% from the year-ago quarter. (During the quarter, the company said 1 British pound was worth $1.81 U.S., on average.)

The drugmaker said that revenue came in at 5.1 billion pounds, or $9.2 billion, which is down 6% year over year with generic competition eating into sales of both antidepressants. In premarket action, shares of Glaxo rose 69 cents, or 1.7%, to $40.50.

Sales of Glaxo's line of Wellbutrin-related products dropped 7%, driven by a 76% decline in Wellbutrin IR/SR. Sales of its Paxil line fell 41%, driven by a 64% drop in sales of Paxil IR, the oldest version of the drug.

Sales of the asthma treatment Advair were a bright spot, however, rising 22% year over year, as were sales of the diabetes drug Avandia, which rose 59% against an easy year-ago comparison. Also, the company said that line extensions of Paxil and Wellbutrin helped mitigate some of the sales drop-off, as did supply agreements with Watson Pharmaceuticals (WPI - Cramer's Take - Stockpickr) and Par Pharmaceuticals (PRX - Cramer's Take - Stockpickr).

Going forward, Glaxo said that based on constant currency exchange rates, 2004 earnings per share would be at least in line with 2003 earnings, which were $2.67. The company said it expects to return to growth in 2005.