After Posting Lower Profit, Glaxo to Cut Costs

The company, Britain’s biggest drug maker, said on Wednesday that a new program to restructure European operations, drug manufacturing and research would save at least about $1.6 billion annually by 2016.

After putting a number of major drug patent losses behind it, Glaxo 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.

The company reported that its net profit fell 35 percent, to £839 million (about $1.35 billion), from £1.28 billion in the fourth quarter a year earlier. Sales in the quarter fell 3 percent, to £6.80 billion. Excluding onetime items, Glaxo said it earned 32.6 pence a share, up 4 percent.

Analysts had forecast sales of £6.88 billion and earnings of 31.3 pence a share, according to a survey by Thomson Reuters. Glaxo’s chief executive, Andrew P. Witty, hopes to do better this year. He predicted on Wednesday that earnings per share, after stripping out some items, would grow by 3 to 4 percent at constant exchange rates in 2013, with sales rising about 1 percent.

Still, the forecast increase in sales and earnings this year was less than some analysts had hoped. A Deutsche Bank analyst, Mark Clark, also noted Glaxo gave a cautious outlook for profit margins, since these are expected to improve only “over the medium term.”

Europe has been a weak point for many drug makers, but Glaxo’s portfolio has been particularly hard hit by government budget cuts. As a result, Mr. Witty said he was taking action to ”reduce costs, improve efficiencies and reallocate resources.”

Article source: http://www.nytimes.com/2013/02/07/business/after-posting-lower-profit-glaxo-to-cut-costs.html?partner=rss&emc=rss