Company of the week: Glaxo Wellcome

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The Independent Online
THE GILT came off shares in Glaxo Wellcome after the world's biggest maker of asthma and Aids drugs warned it might not meet its goal of raising profit and sales 10 per cent this year amid slower US sales growth.

The shares fell 11 per cent, although some of the losses were recovered by Friday. Glaxo blamed competition to its migraine pill Imitrex from Merck and AstraZeneca and lagging sales of its smoking-cessation drug Zyban for the expected shortfall. The warning came as the company posted a 9.6 per cent increase in first-half earnings.

Glaxo said new drugs like Relenza for flu and Zeffix for hepatitis B will lift second-half sales and fuel "strong growth" from 2000. The company is under investor pressure to match US rivals' double-digit profit growth rates to prop up its stock price. Analysts said its forecast might be premature.

"I am quite surprised that they decided to throw in the sponge on double- digit growth this early," said Paul Diggle, an analyst with SG Securities. With new drugs reaching the market, "There is every chance they could still come in with the numbers. And the long-term growth rate doesn't change."

The decline in Glaxo's shares took them to their lowest level for more than nine months. They are down 32 per cent from their peak this year in January.

Glaxo has repeatedly committed itself to delivering double-digit sales and earnings growth this year for the past two years, a target it reiterated most recently in May. Richard Sykes, Glaxo's chairman, said he would no longer forecast future percentage growth after the latest setback.

"I have no regrets about making that statement," Mr Sykes said. "We believed we could achieve that." However, he said that because of the uncertainties about new product growth, "I don't think we are wise to continue that."