Saved by Emerging Markets. Sort Of.

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The emerging markets are saving GlaxoSmithKline (NYSE: GSK) -- at least on the top of the profit-loss statement.

The company managed a 15% increase in revenue for the third quarter, but that was mostly because of a weaker British pound. Sales at constant currency were up just 3%. Still, we shouldn't complain, considering the last time the company reported revenue growth at constant currency was the fourth quarter of 2007.

Sales in the U.S. were down 12% as generic competition continues to hamper sales. The downturn in the U.S. was made up for by the 25% growth in sales in the emerging markets, which now make up 14% of sales. Unfortunately, as I've pointed out, not all revenue should be treated equally. Glaxo makes a 64.6% operating margin (excluding global research and development) on sales in the U.S., compared with a 38% operating margin in the emerging markets. A straight transfer of revenue from the U.S. to the emerging markets is a losing proposition.

Fortunately, the future for U.S. sales looks a little brighter, because year-over-year comparisons for the off-patent drugs won't be quite as bad. The company also received three new Food and Drug Administration approvals in the past two weeks, including its long-awaited HPV vaccine, Cervarix, which will compete with Merck's (NYSE: MRK) Gardasil, and Votrient, which should be able to compete well with Pfizer's (NYSE: PFE) Sutent and Bayer's and Onyx Pharmaceuticals' (Nasdaq: ONXX) Nexavar in the kidney cancer market.

Glaxo is also expecting a nice windfall from sales of swine flu vaccine in the fourth quarter, as well as a boost from its antiviral medication Relenza. The drug doesn't have nearly the sales that Roche and Gilead Sciences' (Nasdaq: GILD) Tamiflu does, but the windfall is nice, although we hope (for the world's sake) that it's not recurring.

A turnaround at the top was welcome. Now Glaxo just needs to get the U.S. tuned back around. If it does, we should see substantial growth at the bottom.

Looking for a pure play on the emerging markets? Check out where Tim Hanson thinks is the next great place to invest.