Weak pound boosts GSK first quarter revenue but company warns of generic competition

GlaxoSmithKline reported a better-than-expected performance in the first quarter of its financial year, but warned the threat of new generic rivals could put its earnings under pressure over the course of the year.

In the first three months of 2017, the FTSE 100-listed group reported a 19% year-on-year increase in revenue to £7.4bn, marginally higher than forecast at £7.25bn.

The pound's depreciation in the wake of last June's Brexit referendum, which has seen the currency fall about 15% against the dollar, delivered a major boost to the company's revenue and also helped lifting earnings per share by 31% to 25p.

Emma Walmsley, who replaced former chief executive Andrew Witty earlier this month, highlighted the company had kicked off 2017 on the front foot. "This is a positive start for the year with sales growth in all three of our businesses and an improvement in the group's operating margin," she said.

Under Witty's stewardship, GSK built up a diversified business, with vaccine units and large consumer health operations flanking the group's core pharmaceutical business. GSK reported revenue growth across all three divisions, with the latter's increasing by 17% year-on-year, while sales in the vaccine and consumer health businesses were respectively 31% and 16% higher than in the corresponding period last year.

On Wednesday (26 April), Walmsley indicated she intends to keep the company following the same strategy implemented by her predecessor.

"Our clear focus is on commercial execution and preparation for near-term launches in respiratory, HIV and vaccines," she said. "We will be reviewing these and other priorities for the business with shareholders alongside our second quarter results on 26 July."

However, GSK warned that generic competition for its high-selling lung drug Advair could dent its financial performances this year. In February, the firm said that, in the absence of competitors, core earnings per share could grow as much as 7% this year but new rivals could see growth downgraded to a flat or slight decline.

In its quarterly report, the group reiterated those expectations, adding it was "not able to give guidance for total results as we cannot reliably forecast certain material elements" of the results.