- GlaxoSmithKline benefited from the steep declines in the pound following the U.K. decision to leave the European Union last quarter, as lower operating costs and stronger international revenue boosted second quarter earnings for the British pharmaceutical giant.
- Revenues grew by 11% last quarter in sterling terms, rising to £6.5 billion ($8.5 billion). Pharmaceutical sales grew by 10% from a year prior, totaling £3.9 billion last quarter.
- Glaxo also announced Wednesday it would invest £275 million ($360 million) into its Durham, Hertfordshire, and Montrose plants in the U.K., reinforcing its strong presence in the country even as Brexit threatens a common European market for pharmaceuticals.
The investment "is testament to our skilled UK workforce and the country’s leading position in life sciences that we are making these investments in advanced manufacturing here," said Andrew Witty, GSK's Chief Executive Officer. "From their manufacture in the UK, many of these medicines will be sent to patients around the world."
The new investments will be split among the Barnard Castle plant in Durham, to construct a new aseptic sterile facility; the Montrose plant in Angus, Scotland, to construct a new facility for the production of respiratory active ingredients; and the Ware plant in Hertfordshire, to expand manufacturing capacity for the company's respiratory product line.
June's Brexit vote created large uncertainties for pharmaceutical companies operating in the U.K. And although GSK did not anticipate a significantly adverse impact on its operations, Witty had been one of many pharmaceutical executives to speak out against a potential Brexit.
"The Group continues to monitor the impact of Brexit on its principal risks and remains of the view that it will add complexity to a wide range of business activities, with some short-term disruption likely," the company stated in its second-quarter risk assessment.
But the immediate impact appears to have been favorable for GSK. With nine plants in the country, trade agreements still in place and a weaker pound sterling, the company now has cheaper labor and operating costs. The company reported in its presentation that the currency provided a positive 7% impact on reported sales, and a beneficial 2.6% effect on the company's operating margin.
In fact, most of the company's growth seems attributable to an increase in U.S. sales complemented by relatively stangant European and international sales. When compared to the first quarter, U.S. sales increased by 55% (£593 million) last quarter. The increase was primarily driven by a similar 55% increase in HIV sales (£306 million), as Tivicay and Triumeq recorded a combined £216 million year over year growth.