Emerging markets are paying off for GlaxoSmithKline, but it's pandemic flu that's really accelerating sales. Third-quarter profits jumped by 30 percent to £1.34 billion ($2.18 billion), partly on currency effects, while sales grew 15 percent to £6.76 billion ($11.05 billion). The numbers have analysts cheering CEO Andrew Witty, and the man himself says the worst of Glaxo's patent-cliff losses are over.
"Witty has delivered," West LB analyst Simon Mather told Bloomberg. "Glaxo is emerging from their patent cliff just as the other companies are going into theirs, and the pipeline seems to be delivering." The company credit's Witty's diversification strategy for its strong performance, saying that it's no longer so dependent on "white pills and western markets."
Emerging markets sales now account for 14 percent of Glaxo's total revenues, BBC reports, and the company isn't yet finished investing in those countries. That growth helped offset a 12 percent drop in U.S. sales, on competition for blockbusters such as migraine remedy Imitrex and the psychiatric drug Lamictal. Meanwhile, Witty says he expects "significant" flu-related sales during the fourth quarter, which also will help make up for generic competition.
Of course, Glaxo's profits also depend on a cost-cutting program that has slashed its payroll by 10,000 jobs over the last two years. Earnings this quarter excluded the costs of that restructuring, which is designed to save the drugmaker £1.7 billion annually by 2011.