GSK enters the dragon's den

The results were otherwise low-key, with disposals of non-core over-the-counter products such as Lucozade keeping revenues flat so far this year. Underlying pre-tax profits showed a 6 per cent decline to £3.52bn and adjusted EPS were flat at 53p with the benefit of a lower tax charge. The reported figures in our table were mainly hit by restructuring charges. As ever, future prospects remain dependent on the performance of its product pipeline and, on current evidence, this is proving to be extraordinarily productive - up to 13 medicines are due to report Phase III data over the next 12 months.

However, chief executive Sir Andrew Witty did concede that the China investigation, which focuses on the alleged bribing of doctors to prescribe medicines, would have an effect on GSK: "Clearly, we are likely to see some impact to our performance in China as a result of the investigation, but it is too early to quantify the extent of this." Mr Witty has a valid point as breaking out the potential cost to GSK of major fines in China is difficult in the context of the company's overall performance. For example, China forms part of GSK's Africa, Middle East & Pacific division where sales for the half were 5 per cent higher at £2.3bn, generating operating profits of £712m on a margin of 30 per cent. However, this is small change in relation to the key US market where a profit margin of 70 per cent produced higher operating profits of £2.45bn (2012: £2.38bn) despite flat revenues.

On the products side, three GSK medicines were approved for sale in the US, with its Breo Ellipta treatment for chronic obstructive pulmonary disease (COPD) an important addition to its respiratory medicine portfolio. In addition, the company's oncology franchise was boosted by the approval of Tafinlar and Mekinist for melanoma treatment.

Management guidance remains unchanged at 3-4 per cent underlying EPS growth for the full-year. Prior to these results analysts at JPMorganCazenove expected full-year adjusted EPS of 119p.