GlaxoSmithKline plc, the world's second largest pharma company, has suffered a setback during the first quarter ended March 2009 on account of stiff generic competition in US. The company's net profit declined by 12.2 per cent to British £1,169 million from £1,332 million in the corresponding period of last year. It's net sales, including consumer products, increased by 19 per cent to £6,769 million from £5,686 million. The Board has declared a first interim dividend of 14 pence per share (Q1 2008: 13 pence).

The pharmaceutical sales declined by 6 per cent to £5,623 million. Its pharmaceutical sales in US declined by 22 per cent to £2,283 million, but that in Europe increased by 7 per cent to £1,840 million. The emerging market achieved strong sales growth of 18 per cent and Asia Pacific/Japan of12 per cent during the quarter under review. Vaccine sales increased by 18 per cent to £625 million.

Andrew Witty, CEO, said, "This quarter has shown divergent performances in our pharmaceutical business with US sales declining 22 per cent to £2.3 billion, but strong sales performances reported in other regions. Europe, emerging markets, Asia Pacific/Japan and our consumer healthcare business all delivered good growth this quarter and contributed £4.3 billion in sales, representing approximately 66 per cent of overall turnover."

Witty continued, "In the USA, we are experiencing some of our toughest performance challenges as our product portfolio transitions and we re-shape our business. Generic competition to our heritage CNS portfolio reduced sales by close to £450 million compared to the same quarter last year. As I have said before, our US business is a vital part of GSK's future and we are aggressively re-engineering our US operations to make sure we have the right resource in the right areas and an overall lower level of infrastructure costs."

"I am confident that we are making progress to adapt our US business model, and that we will deliver long-term success in this marketplace. I am equally confident that, in the short-term, with generic exposure reducing significantly and several new product launches to come, we can expect a significant improvement to the performance of this business during the second half of 2009," Witty added.

R&D expenditure at 15.9 per cent (Q1 2008: 13.7 per cent) of total turnover was impacted by £115 million of intangible asset write-offs, including £90 million with respect to elesclomol. Excluding these write-offs, R&D expenditure would have been 14.2 per cent of turnover. We now expect R&D expenditure for the current year to be slightly higher as a percentage of sales than in 2008 (14.4 per cent).