By Ben Hirschler
LONDON, July 27 (Reuters) - Demand for new medicines helpedGlaxoSmithKline grow earnings in the second quarter andthe drugmaker is set for big gains in the rest of 2016 thanks toa weak pound, after Britain's vote to leave the European Union.
GSK, whose outgoing chief executive Andrew Witty had backedBritain staying in the EU, will benefit from the fact that manyof its costs are in sterling while it earns nearly all its moneyoverseas.
It earlier announced 275 million pounds ($361 million) ofnew investments at three drug manufacturing sites in Britain.
Quarterly sales, in sterling terms, rose 11 percent to 6.53billion pounds ($8.55 billion) in the three months to June,generating core earnings per share (EPS) up 42 percent at 24.5pence, GSK said on Wednesday.
Analysts, on average, had forecast sales of 6.34 billionpounds and core EPS, which excludes certain items, of 21.0p,according to Thomson Reuters.
GSK edged up its forecast for full-year core EPS growth atconstant currencies to 11 to 12 percent from 10 to 12 percentseen previously.
In sterling, however, earnings are likely to grow far more.The company said that if exchange rates were to hold at theend-June rates, there would be a positive impact of 19 percenton core EPS.
That currency effect also protects the dividend, which GSKhas pledged to keep at 80 pence a share this year and next.
Witty has been under pressure since 2013 as profits haveflagged and some investors have questioned his strategy, but heis confident he can hand over the company in a strong recoveryphase when he retires next March.
New respiratory and HIV medicines are offsetting fallingsales of ageing lung treatment Advair, while profitability isalso improving in consumer healthcare, which makes productsranging from headache pills to toothpaste.
The consumer division is currently run as a joint venturewith Novartis and there has been speculation GSK mightbuy out its minority partner before 2018, although the Swissfirm's CEO said last week he was in no rush to sell.
GSK has declined to join a mergers and acquisitions spreethat has seen many other large pharmaceutical companies snap upsmaller rivals in recent years.
But it moved to boost its drug pipeline by announcing onWednesday it has agreed to pay Johnson & Johnson up to175 million pounds for rights to an experimental biotechtreatment for severe asthma. ($1 = 0.7639 pounds) (Editing by Adrian Croft)
Glaxosmithkline (GSK)