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* U.S. Advair sales drop 20 percent, China also weak
* CEO says broad-based M&A deals "distracting"
* Q1 sales 5.61 bln pounds vs consensus 5.84 bln
* Q1 core EPS 21.0 pence vs consensus 20.7p
* Shares down 2.4 percent, underperform FTSE 100 (Adds further analyst comment, latest shares, story link)
By Ben Hirschler
LONDON, April 30 (Reuters) - GlaxoSmithKline's salesfell 10 percent in the first quarter as its flagship lung drugAdvair struggled in a tough U.S. market, highlighting the kindof pricing pressures behind a wave of deals sweeping the sector.
GSK joined the deal-making bandwagon last week to trade morethan $20 billion of assets with Swiss rival Novartis,representing the kind of targeted transaction that ChiefExecutive Andrew Witty said he much preferred to mega-mergers.
U.S.-based Pfizer has rocked the industry by tryingto buy GSK's smaller British rival AstraZeneca for $100billion, but Witty said he was just an "interested observer" inthat fight.
Asked if GSK could consider a "white knight" counterbid, hedeclined to comment specifically but told reporters that suchbroad-based deals were "distracting".
GSK's performance in the three months ended March wasovershadowed by a 20 percent fall in sales of Advair in theUnited States, after one of the country's largest healthcareproviders stopped paying for prescriptions.
Sales of its new respiratory drug Breo have also been slowerthan anticipated due to delays in securing healthcare contractsfor the medicine, although GSK expects things to improve fromnext month.
Alistair Campbell, an analyst at Berenberg Bank, said GSK'sreliance on Advair had long been a concern for investors, makingnew lung products vital for the future, and the unimpressivestart for Breo in the U.S. market was disappointing.
GSK shares fell 2.4 percent by 1500 GMT. Deutsche Bankanalyst Mark Clark said the worse-than-expected salesperformance and the dropping of explicit sales growth guidancewould lead analysts to question their profit assumptions.
NO EXPLICIT SALES FORECAST
Reported sales in the first quarter, which were hit by thestrength of sterling, totalled 5.61 billion pounds ($9.45billion), generating "core" earnings per share down 20 percentat 21.0 pence.
Analysts, on average, had forecast sales of 5.84 billionpounds and core EPS, which excludes certain items, of 20.7pence, according to Thomson Reuters.
GSK said it still expected sales to grow over the year inconstant exchange rate terms, after a 2 percent decline on thisbasis in the first quarter, but it is no longer giving aspecific figure. Previously it had predicted 2 percent growth.
The company reiterated its target of increasing 2014 EPS bybetween 4 and 8 percent.
In addition to the weak Advair performance, GSK alsocontinued to be held back by difficulties in China, where salesfell 20 percent from a year ago, following a damaging briberyscandal that broke last July.
The global drugs industry is having to contend withincreasing pressure on healthcare spending, prompting a wave ofrestructuring as companies seek to focus on areas of strengthand exit those where they lack the scale to compete.
CEO Witty aims to do that via his recent deal with Novartisto sell its cancer drugs and buy most of the Swiss group'svaccines, with the two firms also creating an $11 billion-a-yearconsumer health business.
The revamp means GSK in future will get 70 percent of salesfrom its franchises in respiratory medicines, HIV, vaccines andnon-prescription consumer health.
($1 = 0.5936 British Pounds) (Editing by Mark Potter and Erica Billingham)
