GlaxoSmithKline profits up sharply

The firm says it is shifting away from "white pills in western markets"

UK drugmaker GlaxoSmithKline has reported pre-tax profits of £1.9bn during the three months to the end of December 2011, up from a £193m loss during the same period in 2010.

For the whole year, the firm reported pre-tax profit of £8.2bn, up from £4.5bn in 2010.

The results were boosted by rising sales in Japan and emerging markets but this was offset by a 4% fall in Europe.

The firm also said it was continuing with its effort to cut costs.

Glaxo - which makes medicines such as Wellbutrin, Zovirax, Ventolin and Advair - has been undergoing a major restructuring over the past three years to try to save money and improve efficiency.

The headline profit figures do not include the costs of restructuring. Taking those into account, Glaxo made £1.7bn from October to December and £7.6bn throughout the whole of 2011.

Analyst reaction has been cautiously positive.

"While the results were superficially slightly disappointing, Q4's underlying picture is positive and reinforces our view that GSK's structural recovery is on track, with the stock likely just beginning a multi-year re-rating," said Emmanuel Papadakis, pharmaceutical analyst at Collins Stewart.

"2012's performance is likely to be buoyed by growing generalist appeal and positive R&D newsflow."

European dip

Chief executive Andrew Witty said sales in Europe had dipped because of poor economic conditions and Glaxo's overall sales were shifting away from "white pills in western markets".

"Pricing pressure in Europe adversely impacted underlying growth in the region by approximately 5 percentage points (approximately £320m) during 2011," said Mr Witty.

"We anticipate a similar impact in 2012. I will acknowledge here the resilience of our European management team in what is a very challenging environment."

Sales in Glaxo's flu vaccine also fell compared with 2010 when it was used against both regular flu and the outbreak of swine flu.

Drug development

The firm announced that it expects to complete development of a new lung drug called Relovair in mid-2012 to treat chronic obstructive pulmonary disease (COPD) and asthma. The new drug would replace its former best-selling lung treatment, Advair.

Relovair is one of a number of new drugs that the company expects to introduce in 2012.

The firm highlighted 15 drugs and vaccines that were in the late stages of development last year, and Mr Witty said that nine of them had finished clinical trials, three were ready to file with regulators and one had already been filed.

Glaxo hopes that the new pipeline of drugs will go some way to avoiding the loss of revenue that occurs when drugs go out of patent and face competition from cheaper generic versions.

"All this comes with increasing signs that we can replenish our pipeline on an ongoing basis," Mr Witty said.

Rival drugs firm AstraZeneca recently announced that profits for the three months to the end of December had fallen to $2.05bn, down from $2.28bn the year before, citing competition from generic drugs as one reason for the drop.

AstraZeneca also announced a further 7,300 job cuts over the next two years as part of a new restructuring programme.