Glaxo target doubts knock pounds 2.9bn off value

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SHARES IN Glaxo Wellcome fell 3.5 per cent, or 61p, to 1,735p yesterday after the pharmaceuticals giant delivered a trading statement casting doubts on its ability to meet its annual targets. The fall knocked pounds 2.9bn off the value of the pounds 65bn company, whose shares have underperformed the market by 20 per cent in the last three months.

At the annual meeting, directors said sales in the first quarter were pounds 2.68bn, a rise of 2 per cent on the period last year at constant currencies. The company has pledged to achieve double-digit sales and earnings growth this year. Chairman Sir Richard Sykes yesterday repeated the promise, saying: "The group remains totally committed to this goal."

Glaxo blamed the performance on lower demand by wholesalers in the US, where sales fell by pounds 100m, but said the underlying growth of the US business was robust. Imitrex, the migraine treatment, and Zyban, the smoking deterrent, were facing "increasingly competitive markets".

However, sales in Glaxo's core respiratory and anti-viral businesses remained strong, and sales in Europe grew by 9 per cent in constant currencies.

Five new products, including Ziagen, a treatment for HIV and Aids, would significantly increase sales growth in coming months, said Sir Richard.

Many sector watchers did not share Glaxo's optimism. "There was already a debate under way about Glaxo's targets, and this will intensify it," said Ian Smith, pharmaceuticals analyst at Lehman Brothers. "This puts a lot of pressure on new drugs to perform."

One analyst said Glaxo was getting its comeuppance for raising prices and forcing US wholesalers into panic buying last year, creating the current de-stocking. "Unless Glaxo can pull a rabbit out of the hat, the only way it will be able to meet its targets now is by making some acquisitions," he said.

Talks between Glaxo Wellcome and SmithKline Beecham fell apart early in 1998 after disagreement over management structure. The group's sales last year were flat at pounds 7.98bn, after Glaxo's patent of Zantac, the anti- ulcerant, expired.