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GSK Posts Q4 Loss; Expects To Make Continued Progress In 2018

GlaxoSmithKline plc (GSK,GSK.L) posted a loss in the fourth-quarter of 2017, compared to profit in the prior year, reflecting the impact of US tax reform together with an increased impact of charges arising from increases in the valuations of the liabilities for contingent consideration and the put options associated with increases in the Sterling value of the Group's HIV and Consumer Healthcare businesses. Turnover increased 1% in Sterling terms and 4% CER.

The Group expects to make continued progress in 2018, although the expectation for Adjusted earnings per share growth is impacted by a number of factors including, in particular, uncertainties relating to the timing and extent of potential generic competition to Advair in the US.

In the event that no substitutable generic competitor to Advair is introduced to the US market in 2018, the Group expects 2018 Adjusted earnings per share growth of 4 to 7% at CER. This is based on an expected decline in 2018 US Advair sales of 20-25% at CER.

In the event of a mid-year introduction of a substitutable generic competitor to Advair in the US, the Group expects full year 2018 US Advair sales of around 750 million pounds at CER (US$1.30/£1), with Adjusted earnings per share flat to down 3% at CER.

The Board intends to maintain the dividend for 2018 at the current level of 80 pence per share, subject to any material change in the external environment or performance expectations.

For the Group specifically, over the period to 2020 GSK expects further declines in sales of Seretide/Advair. The introduction of a generic alternative to Advair in the US has been factored into the Group's assessment of its future performance. The Group assumes no premature loss of exclusivity for other key products over the period. The Group expects at least 6 billion pounds of revenues per annum on a CER basis in 2018 from products launched since 2013 including contributions from Shingrix.


The 2018 guidance and 2016-2020 outlook have factored in all divestments and product exits since 2015, including the divestment and exit of more than 130 non-core tail brands (£0.5 billion in annual sales) as announced on 26 July 2017.

The Group's expectations assume successful delivery of the Group's integration and restructuring plans over the period 2016-2020 including the extension and enhancement to the combined programme announced on 26 July 2017. Material costs for investment in new product launches and R&D have been factored into the expectations given. Given the potential development options in the Group's pipeline, the outlook may be affected by additional data-driven R&D investment decisions.

The expectations are given on a constant currency basis (2016-2020 outlook at 2015 CER). Subject to material changes in the product mix, and following the enactment of US tax reform, the Group's medium-term effective tax rate is expected to be in the region of 19-20% of Adjusted profits.

GlaxoSmithKline reported that its loss attributable to shareholders for the fourth-quarter of 2017 was 546 million pounds and 11.2 pence per share, compared to profit of 257 million pounds and 5.3 pence per share in the previous year, primarily reflected the impact of US tax reform together with an increased impact of charges arising from increases in the valuations of the liabilities for contingent consideration and the put options associated with increases in the Sterling value of the Group's HIV and Consumer Healthcare businesses. This was partly offset by improved performance and reduced restructuring costs.

Profit before taxation was 442 million pounds, up from 423 million pounds, in the previous year.

Total operating profit declined to 512 million pounds from 595 million pounds, reflecting the increased impact of accounting charges related to re-measurement of the liabilities for contingent consideration, put options and preferential dividends, as well as continuing price pressure, particularly in Respiratory, and supply chain investments, partly offset by sales growth and tight control of ongoing costs.

Adjusted earnings per share of 27.2 pence was up 7% AER, 11% CER, compared with a 5% CER increase in Adjusted operating profit.

Turnover for the quarter grew to 7.64 billion pounds from 7.59 billion pounds in the prior year.

The Board has declared a fourth interim dividend for 2017 of 23 pence per share, same with last year.The ex-dividend date will be 22 February 2018, with a record date of 23 February 2018 and a payment date of 12 April 2018.

by RTT Staff Writer

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