Andrew Witty, the chief executive of GlaxoSmithKline, said in July that he did not know whether the drugs giant expected to make a lot of money from swine flu. The company’s third-quarter results and outlook have banished any doubt that it has.

Sales of Relenza, its anti-viral drug, which has been stockpiled by governments to treat swine flu, hit £182 million in the three months to the end of September — a drop in the ocean compared to overall revenue of £6.75 billion, but Mr Witty said that sales of the Pandemrix pandemic vaccine could reach £1 billion in the fourth quarter, with 440 million doses already ordered.

The speed at which the company has been able to mobilise its operations to tackle the vaccine demand has helped to offset the impact of generic competition to its biggest-selling drugs, a factor that has weighed on GlaxoSmithKline’s sales as well as its investment case.

Yet looking beyond the pandemic, GlaxoSmithKline is making progress in shifting its business away from dependence on blockbuster drugs such as Advair, its asthma treatment, and towards driving growth from new products, emerging markets and its consumer business. Despite describing the company as “a work in progress”, Mr Witty emphasised the changing shape of the world’s second-largest pharmaceutical company, noting that only 30 per cent of its revenue in the quarter was derived from its traditional “white pill/Western markets” business, compared with 38 per cent when he took in the second quarter of 2008.

The 3 per cent top-line growth was in line with forecasts but represents the first time that sales have increased since 2007. Sales in emerging markets shot up by 25 per cent and there was an 8 per cent rise in revenue at its consumer business, which includes Horlicks, Ribena, Panadol and Sensodyne, compared with an average industry growth rate of about 1.5 per cent. Its strategy to generate more growth from its famous franchises through geographical and product diversification is illustrated by its drive to sell Lucozade in China.

The generic threats that have plagued the company over recent years are still apparent, with American sales down 12 per cent. Yet those threats appear to be diminishing, with only Valtrex, a herpes treatment, facing off-patent competition on the horizon.

GlaxoSmithKline believes there are clear signs that its transformation is beginning to bear fruit and it expects a further acceleration in growth in the fourth quarter, with or without swine flu. Despite its commitment to sales growth, even if it is at the expense of margin, the company has also upped its dividend by 7 per cent to 15p. Trading at 10.5 times 2010 earnings forecasts and offering an attractive dividend yield of 5 per cent, it could be time to buy into Mr Witty’s strategy.

Wolfson

Wolfson Microelectronics has been the black sheep of the UK semiconductor sector this year. Shares in peers such as ARM and CSR have surged in the past six months, but Wolfson has been out of step, chiefly thanks to a warning this month of a shortfall in orders for the fourth quarter.

That tested the patience of investors, who had backed the Scottish chip developer despite the loss of the crucial contract to supply chips for the latest iPhone. With sales of older models that contain its chips on the slide, Wolfson’s shares have gone the same way, losing 10 per cent during October.

Despite anticipating a painful end to the year, its third-quarter results did show progress. It has maintained gross margins at 51 per cent and, more importantly, has overhauled its product line — which Mike Hickey, chief executive, described as “tired”. Wolfson has also signed a number of new deals with companies including Nokia to build its chips into new products. That has been achieved without eating into its $100 million (£60 million) cash position, which provides a floor for the share price.

All that bodes well for 2010, and if its customers warm to Wolfson’s audio technology, the hard work should pay off towards the end of next year. There is clearly value in the business and the stock currently trades on one times 2009 revenue forecasts. Yet visibility is low at this point in its recovery, so hold for now.

TRG

In December last year, Andrew Page, chief executive of The Restaurant Group (TRG), the Garfunkel’s and Frankie & Benny’s operator, reflected the prevailing mood when he declared: “I’ve never seen anything like this. It’s going to be bloody in 2009.” The two thirds rise in the shares since then suggests that his pessimism was overdone. Although TRG is not due to update the market until the middle of next month, figures this week from Tragus Group, the privately owned Café Rouge and Bella Italia operator, provide some cause for optimism. Tragus reported full-year like-for-like sales down 2.3 per cent, a far cry from the predicted carnage, and said that recent trading had been bumping along at a similar level.

Unlike Tragus and other rivals, TRG has eschewed the ubiquitous two-for-one promotions, opting instead for value-for-money deals. While that might mean its like-for-likes are closer to the 3.5 per cent decline it reported at the end of August than the Tragus figure, this should benefit margins. The outlook on costs has also improved, while the forecast 20 openings will boost full-year revenues. Improving airport passenger numbers and robust cinema attendances are both good news for TRG’s concessions division.

The shares, up ½p to 180.9p, are trading on a multiple of 12 times full-year earnings, yielding 4.2 per cent. Worth holding.

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