GlaxoSmithKline(GSK) profit slips on generic competition, charges

Pharmaceutical giant GlaxoSmithKline(GSK) on Wednesday reported a 12 percent drop in first quarter profit as U.S. sales tumbled 22 percent in the face of generic competition.

London-based GSK (NYSE: GSK), which has its U.S. headquarters in Research Triangle Park, reported net income of 1.17 billion British pounds, or $1.69 billion, down from 1.7 billion pounds in the first quarter of 2008.

Charges taken for restructuring costs, research and development write-offs and other one-time items also contributed to the reduction in earnings.

Total revenue, or turnover in the British parlance, grew to 6.7 billion pounds, or $9.7 billion, from 5.7 billion pounds. Favorable currency exchanges due to the weakness in the British pound accounted for most of the increase.

Generic competition in the U.S. market cut deeply into sales for epilepsy drug Lamictal (down 61 percent, to $207 million), migraine drug Imitrex (down 68 percent, to $92 million) and antidepressant Wellbutrin XL (down 66 percent, to $78 million).

“In the USA, we are experiencing some of our toughest performance challenges as our product portfolio transitions and we re-shape our business,” CEO Andrew Witty said in a written statement.

Outside of the U.S., GSK produced sales growth in Europe, Asia/Pacific and emerging markets. Over-the-counter sales of consumer products such as Aquafresh toothpaste also rose.

Witty said that he continues to expect the first half of the year to be difficult for GSK due to generic competition in the United States. The second half of the year should show improvement, he said, as fewer U.S. generics are due to be introduced and GSK expects to deliver new, high-margin products to the market.

GSK has about 4,000 employees at its RTP campus and about 1,000 more at its manufacturing facility in Zebulon.

Disclosure I am long GSK shares.