GSK sales up but concerns over Advair hit

GlaxoSmithKline has reported an increase in Group sales of 6% (5% pro-forma) to £27.9bn for the year ended 31 December 2016, with 2016 core EPS up 12% (CER) at 102.4p.

However, GSK said it faces some uncertainty as to the level of its earnings performance, given the possibility of substitutable generic competition to Advair in the US.

In the event of no generic competition to Advair in the US, the Company said to expect 2017 core EPS growth to be 5-7% CER.

In the event of a mid-year introduction of a substitutable generic competitor to Advair in the US, expect full year 2017 US Advair sales of ~£1 billion at CER (US$1.36/£1) with core EPS flat to a slight decline in percentage terms at CER.

The Group declared a 23p dividend for Q4, making the total dividend for 2016 of 80p, and says to continue to expect 80p dividend for 2017.

Sir Andrew Witty, Chief Executive Officer, GSK said:

"2016 has seen GSK perform strongly with good sales growth across all three businesses, excellent new product momentum, disciplined cost control and further pipeline progress. Core EPS for the year was 102.4p, up 12% CER and we have announced a dividend of 23 pence for the quarter, making a total dividend for shareholders of 80 pence for 2016.

"Our performance reflects the investments we have made to build new scale and sustainability in the Group and to develop new products. We expect the sales momentum of our new products to continue and, with regulatory decisions on other major product opportunities also expected this year, like Shingrix and Closed Triple, we remain confident in the financial outlook we have previously set out for investors.

"Clearly, this year we face some uncertainty as to the level of our earnings performance, given the possibility of substitutable generic competition to Advair in the US, and this is reflected in the guidance we have issued today. This event is something we have anticipated and prepared for, and whilst there will be an inevitable financial impact to absorb, we fully expect to maintain leadership in this therapy area given our new product portfolio and the innovation we have in our pipeline.

"The next 24 months will be significant for GSK's pipeline and it marks the start of another intense period of R&D activity for the company, as we expect important data read-outs on around 20-30 assets in HIV, respiratory, immuno-inflammation, oncology and vaccines.

"This quarter marks the last I will report to shareholders after nearly 10 years as CEO and more than 30 years as an employee. GSK is a very special company that touches people's lives across the world and I feel enormously privileged to have had the opportunity to lead it. I would like to thank all of GSK's employees, partners and shareholders for their support to build a company that delivers strong financial performance and meaningful contributions to society."

At 1:21pm: (LON:GSK) GlaxoSmithKline PLC share price was -13.5p at 1549p