Confident Glaxo throws down sales gauntlet to SmithKline

GLAXO WELLCOME, the world's second largest drug company, yesterday threw the gauntlet down to its arch-rival SmithKline Beecham with a pledge to match its double-digit growth in sales and earnings.

Sir Richard Sykes, Glaxo's ebullient chairman, said that growth in existing products and a strong drug pipeline would boost turnover and profits despite the collapse in sales of two of its blockbusters.

The pharmaceutical giant's sales have been savaged in the past two years following the expiry of patent protection on the ulcer drug Zantac and the herpes treatment Zovirax.

However, Sir Richard said that he was "confident" that the new products "will enable us to achieve double digit sales and earnings growth at constant exchange rates in 1999".

Only last week, SmithKline Beecham, whose pounds 120bn mega-merger with Glaxo collapsed last year over a personality clash between Sir Richard and his SB counterpart Jan Leschly, pledged to increase earnings by around 13 per cent this year and in the "mid-to high teens" in 2000 and 2001.

The Glaxo response came as the company beat most City analysts' expectations with a strong set of 1998 results.

Profits fell slightly to pounds 2.67bn but were up 5 per cent after stripping out a pounds 150m hit due to the strength of the pound. Sales were flat at pounds 7.98bn but rose 4 per cent after excluding a pounds 300m currency blow and a pounds 800m shortfall from the decline in Zantac and Zovirax.

The shares closed up 21p to pounds 20.14. The stock has almost doubled over the past two years as the City welcomed Glaxo's strategy to ride out the patent expiries and develop new products. Sir Richard said that the Glaxo had survived "one of the most unbelievable episodes in the pharmaceutical history", - the loss of protection on Zantac and Zovirax - and was ready to move on.

He added that Glaxo was almost free from its dependency on its two former blockbusters, with sales of other products - which account for over 85 per cent of turnover - growing 17 per cent last year.

Growth was driven by a 24 per cent jump in sales of respiratory products - Glaxo's most important area of business - to pounds 2.2bn, with the asthma drugs Flixotide and Serevent netting sales of almost pounds 500m each.

The Aids products also had a strong year, while migraine and depression drugs fuelled a 32 per cent rise in central nervous system treatments.

Sir Richard kept open the possibility of a deal with a rival, amid on- going speculation that he might rekindle talks with SmithKline Beecham. He said that he would be prepared to strike a deal even if that resulted in a huge write-off of goodwill - the difference between the price paid for a takeover and the target's asset price.

Outlook, page 17