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GSK faces crucial year after shortfall

Feb 06 2013 15:54 Reuters, AFP

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London - GlaxoSmithKline, Britain's biggest drugmaker, renewed its promise to return to growth this year, after failing to deliver a hoped-for sales and margin recovery in 2012.

GSK announced a 13% drop in annual profits and said it would further restructure its European operations to deliver greater savings amid weaker sales.

Chief executive Andrew Witty said the company was extending its European restructuring programme "to deliver annual cost savings of at least 1bn by 2016".

The company also placed its Lucozade and Ribena drinks brands under strategic review.

After putting a number of major drug patent losses behind it, GSK had originally banked on pulling out of its trough in 2012. In the event, sales were held back by larger-than-expected drug price cuts in austerity-hit Europe.

Sales in the final quarter of 2012 fell 3% to £6.80bn, generating "core" earnings per share (EPS) up 4% at 32.6p pence, the company said on Wednesday.

Analysts, on average, had forecast sales of £6.88bn pounds and core EPS, which excludes certain items, of 31.3p, according to Thomson Reuters I/B/E/S.

Witty is now looking to a clutch of new medicines to revive growth, starting with six drugs that have already been submitted for approval in lung disease, melanoma, diabetes and HIV/AIDS.

Keenly awaited final-stage Phase III clinical trial results are also due for two high-risk, high-reward projects in heart disease and cancer.

That makes 2013 a crucial year for GSK's pipeline, although the main impact on the sales line will be felt during 2014 and beyond - assuming that the new medicines live up to expectations.

GSK's stock has underperformed in the past year, due to disappointment at its lack of growth, and it now languishes second to last among large European drugmakers in terms of sell-side analysts' ratings, ahead only of AstraZeneca, according to Thomson Reuters data.

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