Shares in GlaxoSmithKline dropped on Wednesday despite the company reporting earnings growth at the top end of forecasts, as it warned it could face increased competition for its biggest product in the US.

Full-year revenues of £27.9bn for 2016 were above consensus forecasts, 17 per cent higher than the previous year, or six per cent at constant exchange rates.

GSK’s statutory profit numbers are frequently buffeted by exceptional items and foreign exchange movements, but its core earnings per share grew by 12 per cent to 102.4p, at the top end of the company’s 11 to 12 per cent target.

GSK is emerging from a rocky few years in which sales and profits were hit by the decline of its biggest product, the asthma treatment Advair.

Analysts at Liberum earlier this week argued that the “oil tanker has turned”, with the company’s long turnaround powered by a new generation of respiratory medicines and HIV drugs.

However, the company said progress in 2017 will be difficult to predict due to the uncertainty of estimating the impact of generic competition to Advair.

If no generic competition in the US market materialises, the company expects to enjoy core earnings per share growth of between 5 and 7 per cent. But growth would be “flat to a slight decline” at constant exchange rates if competitors are introduced in the middle of this year.

Sir Andrew Witty, GSK’s outgoing chief executive, said the company has “anticipated and prepared for” the increase in competition, and said: “whilst there will be an inevitable financial impact to absorb, we fully expect to maintain leadership in this therapy area given our new product portfolio and the innovation we have in our pipeline”.

Shares in the group, which fell around 0.8 per cent before the earnings were released at midday, were down 2.4 per cent at publication time, to £15.25.

Sir Andrew added:

2016 has seen GSK perform strongly with good sales growth across all three business, excellent new product momentum, disciplined cost control and further piupeline progress.

The next 24 months will be significant for GSK’s pipeline and it marks the start of another intense period of R&D activity for the company, as we expect important data read-outs on around 20-30 assets in HIV, respiratory, immuno-inflammation, oncology and vaccines.

In addition to major product shifts, GSK is preparing for a changing of the guard at the top of the company, with Sir Andrew due to step down in April after nine years in charge of the company. He will be replaced by Emma Walmsley, currently head of its consumer healthcare business.

Last month GSK also poached former AstraZeneca executive vice president Luke Miels to head its pharmaceuticals business. Analysts said the appointment of the pharma veteran would complement Ms Walmsley’s consumer experience.

The company previously said it is drawing up contingency plans to secure post-Brexit supply chains, saying the terms on which the UK leaves the EU will have a “fundamental effect” on the company’s operations.

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