Profits surge gives injection to GSK and AstraZeneca shares

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The drug giants GlaxoSmithKline and AstraZeneca saw profits soar during the first three months of the year. GSK, Europe's biggest drug maker, was bullish yesterday on the outlook for new drugs, with the breast cancer pill Tykerb and the cervical cancer vaccine Cervarix due to be launched next year.

Its smaller rival, the Anglo-Swedish group AstraZeneca, raised its earnings guidance for the year after a record first quarter and struck a $200m (£111m) deal with the American company Abraxis BioScience to co-promote the breast cancer drug Abraxane. It also sold its anaesthetics and painkillers business to Abraxis for $350m.

Strong vaccine sales and demand for key brands such as the asthma drug Advair/Seretide and Avandia for diabetes sent GSK's sales up 15 per cent to £5.81bn. Pre-tax profits rose 27 per cent to £2.17bn. The company reiterated its earnings growth forecast of 10 per cent this year and Jean-Pierre Garnier, the chief executive, added the group might beat this target. "Clearly, we are ahead of our own plans," he said.

GSK'svaccines business enjoyed a 44 per cent rise in sales to £366m, helped by a move to mass vaccination for hepatitis A in most US states. Last month the company filed its new seasonal flu vaccine FluLaval for US approval, and also began clinical trials of an H5N1 flu vaccine to protect against a possible bird flu pandemic, in a race with France's Sanofi-Aventis.

Cervarix has now been filed for EU approval and is expected to be on the European market next year while remaining on track for filing in the US before the end of the year. David Stout, the president of GSK's pharmaceutical operations, said Cervarix was running three months behind rival Merck's Gardasil in Europe and by 18 months in the US, but added: "This is a huge opportunity for both." Cervical cancer affects 3 billion women worldwide and the vaccine market is estimated to be worth £5bn in peak annual sales.

AstraZeneca's profits jumped 38 per cent to $2.04bn in the first quarter, helped by an expansion of the US Medicare system to make prescription medicines more easily available to the elderly. Sales climbed 8 per cent to $6.18bn, driven by the stomach ulcer pill Nexium, Seroquel for schizophrenia and the cholesterol drug Crestor. Crestor has been boosted by last month's finding that it could help to clear narrowed arteries.

The company raised its 2006 earnings-per-share forecast to $3.60 to $3.90. In the long run it faces patent challenges to Seroquel, Nexium and the top-selling heart treatment Toprol XL. The company, led by David Brennan, is working hard to bolster its slim pipeline of new medicines and has signed deals worth up to $2bn in recent months.