GlaxoSmithKline posts lower Q1 net profit on increase in generic competition

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Avandia, a diabetes treatment drug, received a "black box" warning, the most serious a drug can carry, from the US authorities last November after it received complaints that the drug carried risk of heart attacks. Besides agreeing to the labeling alert, Glaxo has also agreed to a major study assessing Avandia's heart effects, but it said the study will not be complete until 2014.

The drugmaker said sales of Avandia fell 56 percent to £191 million.

While sales of asthma medication Seretide/Advair rose 10 percent to £954 million, sales of heart medication Coreg fell 77 percent to £48 million due to increase in generic competition.

Other Glaxo products hit by generic competition included the antidepressant Wellbutrin, down 3 percent, the Flixonase/Flonase treatment for rhinitis, down 33 percent, and the anti-nausea drug Zofran, down 69 percent.

However, the drugmaker remained upbeat on its its cervical cancer vaccine Cervarix, which is expected to become a major earner for the company.

The company will be filing additional information about the vaccine with the US Food and Drug Administration (US FDA) in the second quarter, a company official said. It has already been approved in more than 60 countries, he added.

"Despite the generic attrition and the fallout from Avandia, they still managed to maintain the top-line performance, which is testament to the resilience of their broad product portfolio," said David Seemungal, analyst at ING.

In a related development, the drugmaker is trying to boost its portfolio by agreeing to acquire Boston-based Sirtris Pharmaceuticals Inc. in an all-cash deal valued at $720 million. Sirtris is best known for developing a modified version of a red wine extract called resveratrol for people with Type 2 diabetes. It is also researching on a recently discovered class of enzymes known as sirtuins that are believed to be linked to the aging process, and appear to restrict calorie intake without a change in eating habits.

Glaxo is the latest of major drug companies to have reported mixed results over the past week, reflecting a global slowdown in sales and a squeeze on margins.

Earlier, Pfizer Inc, the industry leader, shocked investors with worse than expected results although others, like Novartis AG, have managed to salvage profits with cost cutting.

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