GSK sales down, but optimism prevails

GlaxoSmithKline posted a 10 percent drop in quarterly sales. So why are analysts smiling? Apparently, they figure GSK's Q1 was just an obstacle the company had to get past. After all, its sales numbers this year were up against last year's pandemic-flu-fueled revenues. Plus, GSK got hit with lower-priced generic competition for the antiviral drug Valtrex, further undermining this year's figures.

"The first quarter was probably the toughest for Glaxo in terms of year-on-year comparisons for generic competition to products like Valtrex and other elements, such as pandemic flu," Berenberg Bank analyst Alistair Campbell told Bloomberg. "It should get better in the second half." And as Evolution Securities' Dominic Valder told Reuters, "It's a steady set of results. It underpins our confidence that the company will be able to return to sales and earnings growth from later on this year."

Excluding the pandemic-flu products, the Valtrex effect, and declining Avandia revenues, overall sales would have grown by 4 percent, Bloomberg notes. Of course, that's a bit like telling people to ignore the elephant in the room.

Still, that hidden growth has CEO Andrew Witty (photo) smiling, too. "[W]e had a very positive start to the year this year," Witty said on the earnings call. "We are continuing to see good underlying sales growth momentum." He said he expects underlying growth "to translate into sustainable reported growth as we exit the year and move into 2012."

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