By Denise Roland and Carlo Martuscelli 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 7, 2019).

GlaxoSmithKline PLC said it expects profit to fall this year as it boosts spending on developing new cancer drugs and faces generic competition for its best-selling inhaler product for the first time.

The British pharmaceutical giant on Wednesday reported upbeat full-year earnings but warned that adjusted earnings per share -- a measure closely watched by analysts -- could fall by 5% to 9% in 2019.

Glaxo, under pressure from investors to replenish its pipeline, is determined to bolster its presence in the competitive cancer market, focusing on drugs designed to aid the body's immune response to tumors.

The company gained a foothold in the oncology market in December with its $4.16 billion acquisition of Tesaro, which sells ovarian cancer drug Zejula. The deal also added several research programs to Glaxo's pipeline. But Glaxo has said it expects the deal to weigh on earnings for the next two years as it absorbs costs related to the transaction and ramps up research investment.

Many drug companies are doubling down on cancer research, driven by recent advances in the field, and the promise of big winnings for those who succeed.

Glaxo, a relative minnow in cancer medicine, is set on gaining a toehold in this lucrative market. "It is very competitive and it is expensive to invest in, but what matters is choosing right assets to back and pursue, " Chief Executive Emma Walmsley said on a call with reporters Wednesday.

Ms. Walmsley said Glaxo's cancer pipeline had doubled in size to 16 drugs since July. The increase was driven by the Tesaro deal and a separate agreement announced Tuesday to collaborate with Merck KGaA on an experimental cancer therapy in the German drugmaker's pipeline.

The company's push into cancer treatments comes as it scales back in other areas. Ms. Walmsley has cut dozens of research projects and is also looking to eventually exit consumer health care. In December, Glaxo announced a plan to combine its consumer health-care unit with Pfizer Inc.'s and then spin off the joint venture.

Glaxo's earnings also will be hit this year by the launch of a generic version of its top-selling inhaler Advair. The U.S. Food and Drug Administration last week said it had approved Mylan's version of the drug. Revenues from Advair have declined in recent years because of increased competition from other products, but it is still one of the company's biggest-selling drugs, generating GBP2.4 billion ($3.1 billion) in 2018.

Glaxo provided the earnings outlook as it reported a 2% rise in sales to GBP30.8 billion for 2018 and a 7% increase in adjusted earnings per share to 119.4 pence.

The results, which beat analyst expectations, sent Glaxo's share price up 1.5% Wednesday afternoon.

Sales from its pharmaceuticals division were up 2% at constant exchange rates for the year, with growth in all therapy areas. HIV drugs were its fastest-growing segment in the division, with sales up 11% at constant currencies.

Vaccines sales grew by 16% at constant currencies, driven by its shingles shot Shingrix. The medicine was in high demand in 2018 and Glaxo has previously reported shortages, forcing it to ration doses.

The company said it expects to declare a full-year dividend of 80 pence per share in 2019 -- in line with the year before.

Write to Denise Roland at Denise.Roland@wsj.com

 

(END) Dow Jones Newswires

February 07, 2019 02:47 ET (07:47 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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