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MARKET COMMENT
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Carburton Street, London -- With a broad portfolio of products in its medicine chest GlaxoSmithKline (LSE: GSK), the world's second biggest drug maker, is unlikely to be rocked by global turmoil. But the pharmaceutical titan needs to demonstrate to investors its ability to drive earnings before its current range of medicines comes under pressure from patent expiries that will see generic substitutes eat into its profit margins. In September, following a meeting with brokers, the drug titan reassured analysts that it was well placed to deliver mid-teen earnings per share growth for a least the next two years. Much of that improvement is expected to come from continued synergy following the union of Glaxo Wellcome and SmithKline Beecham. But savings from mergers are short-lived gains and investors will want to know where how GSK expects to drive future growth. This afternoon, GSK posted third quarters numbers that were bang in line with market expectations. Sales came in at £4.99b and increase of 13% from the same period last year and pre-tax profit was 17% better at £1.35b. Pharmaceutical sales rose a healthy 13% with particularly strong growth in the all-important USA market. The company's respiratory medications, which include the recently launched Advair for the treatment of asthma, improved 36% to £871m. Other therapeutic areas also showed strong improvements with double-digit sales growth in anti-bacterials, central nervous system, antibiotics, gastro-intestinals and cardiovascular & oncology sales. Today's results were widely expected and the £4b share buyback programme should underpin the stock price over the short term. However the lack of detail on the current product pipeline still leaves the question of future growth somewhat unanswered. Those familiar with the pharmaceutical industry will know only too well that drug discovery is the laboratory equivalent of the National Lottery. And GSK needs to convince investors that at least one of those 113 projects in clinical development is the winning ticket. More on the GlaxoSmithKline discussion board.