Forecast Improves for Glaxo

The company also sets a massive buyback.
Publish date:

Updated from 8:18 a.m. EDT


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shares declined Thursday as the company's experimental-drug delays worried investors more than its strong quarterly results impressed them.

The stock closed down $1.26, or 2.3%, at $54.85 on trading that was more than double the daily average for the past three months. The stock fell even though the British drug giant raised its full-year earnings projection and announced a big buyback of shares.

GlaxoSmithKline earned 46 cents a share in the latest quarter, up 21% from the same period last year on a constant-exchange rate basis. Operating profit rose 19% to $3.81 billion, while sales advanced 7% to $10.62 billion.

Full-year earnings-per-share guidance was raised to a "mid-teens" percentage growth rate from the previous forecast of 12%. The expected full-year dividend of 48 pence will be 9% higher than 2005. Over the next three years, GlaxoSmithKline plans to buy back stock worth 6 billion British pounds, double the existing rate.

Behind the financial headlines, however, came the announcement that the company would delay until April filing with U.S. regulators an application for Cervarix, its vaccine against the

virus that causes cervical cancer.

Although the delay amounts to about four months, GlaxoSmithKline can't allow


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to gain too much of a first-to-market advantage.

Merck's Gardasil is already available. The Food and Drug Administration approved it in June, and the influential Advisory Committee for Immunization Practices also endorsed it. Support by this panel of immunization and public health experts influences coverage by government health programs and private insurers.

GlaxoSmithKline also put clinical trials on hold for a diabetes treatment called Redona, which belongs to the same class of drugs, nicknamed DPP4-inhibitors, as Merck's Januvia.

The FDA approved Januvia earlier this month as the first among many DPP-4 inhibitors under development.



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drug is under review by the agency, which could take action next month.

GlaxoSmithKline also said it had stopped working on a treatment for sepsis due to an "unfavorable risk/benefit assessment."

Still, there was favorable news in the quarter. Sales of the asthma drug Advair rose 14% from a year ago to $1.53 billion. Revenue from the Avandia family of diabetes drugs climbed 11% to $713 million.

The epilepsy and bipolar disorder drug Lamictal gained 27% to $483 million, and the herpes drug Valtrex added 26% to $403 million. The heart disease medication Coreg climbed 32% to $367 million, and the company predicts sales will be aided by the recent FDA approval for a once-a-day extended-release version of the drug.

Total vaccine sales rose 5% to $771 million, but sales were hampered by delays in shipments. Sales of HIV and AIDS drugs dropped 6% to $683 million because of competition.

The company continues to talk to the FDA about an over-the-counter version of the weight-loss drug Xenical. "All relevant safety and efficacy data have been provided to the agency," the company said. It expects to launch the non-prescription drug, called Alli, during the first half of 2007.