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Glaxo Targets Double-Digit Growth

The company's 2005 earnings per share rise 18%.

British drug giant

GlaxoSmithKline

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posted an 18% increase in earnings per share last year as the company closed out 2005 with a solid fourth-quarter performance.

The company's full-year results were propelled by a strong showing in the final three months. Fourth-quarter earnings per share rose 33% using constant exchange rates, a result that was "a great finish to an excellent year," according to Jean-Pierre Garnier, the chief executive.

In addition to its big lineup of $1 billion-plus products, Garnier said eight experimental compounds will enter late-stage clinical testing this year. That will double the number of products GlaxoSmithKline has in late-stage development.

Although GlaxoSmithKline is on most analysts' short lists for potentially making big acquisitions, Garnier told analysts Wednesday that his top priority is delivering on the company's research and development pipeline.

"We keep looking around

for acquisitions and licensing opportunities just like everybody else," he said.

Garnier said there weren't many late-stage development products last year that looked like attractive licensing deals. But this year may be a better for transactions as other companies' experimental drugs move from early-stage clinical trials to mid- or late-stage testing, he said. Most licensing opportunities, Garnier added, are for products in early development, when the risk of failure is greatest.

For the three months ended Dec. 31, GlaxoSmithKline posted an operating profit of $2.82 billion on sales of $10.3 billion, gains of 20% and 8%, respectively, compared with the same period in 2004 using constant exchange rates.

The full-year's operating profit of $12.51 billion and revenue of $39.4 billion beat 2004's results by 16% and 7%, respectively. The company predicted 10% EPS growth for 2006.

By early afternoon, the company's stock was up 64 cents, or 1.3%, to $50.95.

Like its Big Pharma brethren, GlaxoSmithKline needs a lot of big drugs with healthy growth rates to offset the impact of generic competition on products losing patent protection. GlaxoSmithKline, the second-biggest seller of drugs in the U.S., has 15 products producing $1 billion or more in annual sales.

Among the megadrugs, the asthma medication Advair had worldwide sales of $5.5 billion last year, up 22% from 2004. Advair is the company's best-selling drug. The diabetes drugs Avandia, with sales of $2.1 billion, and Avandamet, whose sales were $319 million, posted a combined gain of 18%.

This year's Advair sales in the U.S. could be affected by

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a public health advisory issued by the Food and Drug Administration in November. The agency says two asthma products -- Advair Diskus and Serevent Diskus -- should have warnings added to their labels, saying these drugs "may increase the chance of severe asthma episodes, and death when those episodes occur."

The drugs, plus similar products made by

Novartis

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and

Schering-Plough

(SGP)

, shouldn't be first-line treatments, the FDA says.

GlaxoSmithKline disputes the FDA's assessment, saying it's inconsistent with National Institutes of Health treatment guidelines. The company is discussing the matter with the agency. Serevent contributed $601 million in worldwide sales last year.

The vaccine business, which the company has been expanding via acquisitions, produced a worldwide sales gain of 15% to $2.41 billion in 2005. Last year, GlaxoSmithKline purchased

Corixa

and

ID Biomedical

to help expand the number of vaccine products and increase its manufacturing capacity.

In 2005, GlaxoSmithKline sold 8 million doses of flu vaccine in the U.S. During the next U.S. flu season, Garnier said he expects the company to produce 30 million to 35 million doses. The company will submit an application for a pandemic flu vaccine to the European Union this year.

GlaxoSmithKline expects seven products to be approved by regulators or launched this year, including Rotarix, a vaccine against the diarrhea-causing rotavirus. The virus causes gastroenteritis, which is debilitating and can be fatal to infants and young children. Rotarix is available in 31 countries, and the company expects it to go on sale in European Union countries during the second quarter.

Merck's

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rotavirus vaccine, Rotateq, was approved by the FDA

earlier this month.

GlaxoSmithKline and Merck also are competing to produce the first vaccine against human papillomavirus, or HPV, a cause of cervical cancer and genital warts. GlaxoSmithKline plans to submit a cervical cancer application to the EU in March and to the FDA by year-end.

Merck submitted a cervical cancer application to the FDA in December for its HPV vaccine Gardasil. On Tuesday, the FDA said the vaccine would get priority review, meaning the agency could act by early June.