GlaxoSmithKline reported a breakthrough with its bird flu vaccine yesterday and will start mass producing it in the autumn. But the drug maker disappointed the City with quarterly figures and cautious guidance for the second half. That knocked the shares down 23p, or 1.5 per cent, to 1,507p.
Europe's biggest drug maker nudged up its forecast for earnings per share growth this year from 10 per cent to 12 per cent, but analysts noted that the new forecast signalled a slowdown in earnings growth after a 16 per cent rise in the first half.
The chief executive, Jean-Pierre Garnier, hailed the first batch of test results on the group's new bird flu vaccine as a "significant breakthrough". The vaccine for the H5N1 deadly strain of bird flu has proved effective on more than 80 per cent of people tested at only two doses of 3.8 microgrammes.
"This is the first time such a low dose of H5N1 antigen has been able to stimulate this level of strong immune response," M. Garnier said. The level of protection is twice as good at half the dose as that shown by a rival vaccine being developed by Sanofi-Aventis.
The size of the dose is significant because during a pandemic it is vital to get the maximum number of shots out of a vaccine. However, GSK has yet to demonstrate that the vaccine is effective against mutations in the virus strain.
It will probably cost the same as a conventional flu shot - between £4 and £7 - and GSK is talking to governments, the World Bank and groups such as the Bill & Melinda Gates Foundation about how to provide it to poorer countries. "We're trying to come to a consensus over the vaccination strategy," David Stout, GSK's chief operating officer, said. Governments could order the vaccine for stockpiling from next year.
The company unveiled a 14 per cent increase in pre-tax profits to £1.9bn for the three months to 30 June. Revenues climbed 11 per cent to £5.8bn, driven by strong vaccine and diabetes drug sales. The asthma treatment Advair posted quarterly revenues of £822m, despite a slowdown in the US after a mild winter.
M. Garnier cautioned that certain one-off factors benefiting the group in the first half would not be repeated in the second. The allergy spray Flonase will feel the full impact of generic competition in coming months after going off-patent in March.
In addition, the group undertook little restructuring in the past six months, but this is set to change in the autumn. GSK also saw some restocking of the diabetes pills Avandia and Avandamet in the first half as well as scooping £91m from asset sales.
The company is counting on a large pipeline of new drugs, which are due to hit the market from next year, to revive sales. It has invested heavily in its vaccines business and intends to submit Cervarix, a cervical cancer vaccine, to US regulators before the end of the year.
GSK has just filed a new hay fever treatment, Allermist, for approval in the US and Europe, and will submit its Tykerb for breast cancer in the third quarter in the US and a little later in Europe. However, development of the depression drug radafaxine was halted after poor test results.Reuse content