GlaxoSmithKline PLC’s (LON:GSK) shares headed to their highest levels in 17 years on Wednesday after the drugmaker upgraded its full-year earnings forecasts following solid third-quarter sales.
The FTSE 100 firm now expects its adjusted earnings per share (EPS) for 2019 will be “around flat” year-on-year, an upgrade from previous guidance in July which had expected an overall EPS decline of between 3% and 5%.
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The company added that its dividend for 2019 will be maintained at 80p per share.
GSK said the new forecast reflected its operating performance across the first nine months of the year, increased investment in research & development (R&D) and a lower expected tax rate for the year.
The more positive outlook accompanied results for the third quarter which showed a 10% increase in adjusted operating profit to £2.8bn, while revenues jumped 16% to £9.4bn.
Sales of the firm’s Shingrix shingles vaccine jumped 87% to £535mln thanks to “continued strong execution in the US”, while sales in its respiratory and HIV divisions increased 25% to £806mln and 5% to £1.3bn respectively.
Emma Walmsley, Glaxo’s chief executive, said the company had also continued to strengthen its pipeline by advancing R&D for products in its Respiratory, HIV and Oncology segments.
Oncology was particularly promising, Walmsley said, with GSK on track to file “three innovative medicines by year end”.
One omission among the results was any news on the group’s Zantac heartburn drug, which was recalled earlier this month after authorities in the UK and US raised concerns over possible carcinogen contamination.
However, this did little to dampen the positive momentum in the share price, which rose 0.6% to 1,752p in mid-afternoon trading to levels not seen since 2002.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said the “robust results” and the “stellar performance” from Shingrix had more than offset a decline in sales from GSK’s Advair inhaler, which had been a drag on the company for years.
“Increased research and development spending means not all of that has made its way through to the bottom line, but it’s still a positive result from a business where growth has been a concern in recent years”, he said.
However, Hyett added that the dividend was still placing “considerable strain” on the company’s cash flow and that a demerger of the group’s consumer business could make like easier.
“Until then the pressure’s on the bulging pipeline to deliver a shot in the arm”.
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