GlaxoSmithKline Future Hangs in Balance on 2013 U.S. Drug Approvals

Published: Jan 11, 2013

It’s a make or break year for GlaxoSmithKline Plc. (GSK) The U.K.’s largest pharmaceutical company is counting on a spate of drugs winning approval this year to reverse recent setbacks and revive growth. Glaxo needs some wins. Its shares fell 9.3 percent in 2012, compared with an 11 percent increase in the Bloomberg Europe Pharmaceutical Index. With five new medicines submitted to regulators for approval and another in the works, help is on the way, according to a top executive. “If all six things failed and we didn’t get them we would be in a bad situation; I don’t think that’s going to happen,” Patrick Vallance, Glaxo’s head of pharmaceuticals research and development, said in an interview in San Francisco. “For the first time in 20 years, GSK could be in a real growth area.” It’s an ambitious rollout for a single year. And the skepticism about Glaxo’s pipeline also reflects a wider problem in the drug industry. Companies have struggled to deliver on their promises to investors to develop enough new products to keep sales growing. For London-based Glaxo, that problem has been compounded because the company’s earnings disappointed investors repeatedly last year. After sales declined 3 percent in 2011, Glaxo in July cut its forecast for 2012, saying sales would be in line with the previous year’s level. It also missed profit and revenue estimates in each of the last three quarters. “Glaxo will seal its fate in 2013,” Philippe Lanone, an analyst at Natixis Securities in Paris, said in a telephone interview. “If the new products fail to make it, the company will be in big trouble.” He has a neutral rating on the shares. The stock’s decline last year was the worst performance among the world’s 10 biggest drugmakers. The shares sell for 11.5 times estimated earnings versus an average price-earnings ratio of 12.2 for rivals.

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