By Anastasia Tomazhenkova: British pharmaceutical, biological, and healthcare company GlaxoSmithKline PLC announced its fourth-quarter net profit fell 10%. The company forecasts a decline in earnings this financial year because of lower sales of its Avandia diabetes pill and greater generic competition.
Shares in Glaxo, the world's second-largest drug maker after Pfizer Inc., dropped more than 6% after the disappointing earnings report.
Glaxo said that net profit fell to 1.06 billion pounds (2.1 billion dollars) in the three months to December 31, compared with 1.18 billion pounds a year earlier. Analysts had expected a figure closer to 1.12 billion pounds (2.2 billion dollars) for the quarter.
Revenue was little changed at 5.97 billion pounds (11.63 billion dollars), from 5.96 billion pounds.
Over the full year, net profit fell 3 percent to 5.21 billion pounds (10.13 billion dollars) from 5.39 billion pounds, while revenue slipped 2 percent to 22.71 billion pounds (44.16 billion dollars) from 23.23 billion pounds.
Glaxo expects the impact of lower Avandia sales and increased generic competition to lead to a mid-single digit percentage decline in earnings per share in 2008.
Sales of Avandia have plummeted in the United States since a report last May by the New England Journal of Medicine that linked the drug to an increased risk of heart attacks. Sales of the medicine, which is used for the treatment of type 2 diabetes, fell 29% over the year to 780 million pounds (1.5 billion dollars) with fourth-quarter sales alone down 55%.
Like other major pharmaceutical companies, Glaxo is also facing greater competition from generic drugs as patents expire.
Chief Executive Officer Jean-Pierre Garnier, who retires in May, said he remains confident about the company's future beyond 2008, thanks to Glaxo's growing vaccine and consumer healthcare businesses and new product pipeline.
The company bought Reliant Pharmaceuticals Inc., a privately held specialty pharmaceutical company focused on cardiovascular therapies, for 1.6 billion dollars in December.
"This year expects regulatory decisions on more than 10 new product opportunities," Garnier said.
Sales of the company's over-the-counter drugs rose 20% to 1.7 billion pounds (3.3 billion dollars) with new weight loss treatment alli recording sales of 150 million pounds (291.6 million dollars) since its launch in June.
However, analysts were more pessimistic about the company's outlook than Garnier, noting the market had been expecting a slight increase in the company's earnings per share this year.
While Glaxo has one of the strongest pipelines of future drugs in the industry, the Avandia troubles have added to a number of setbacks on key drugs. U.S. regulatory approval for the company's Cervarix cervical cancer vaccine, a potential blockbuster, is on hold.
Aurel Leven analyst Jerome Berton said that 2008 will be a difficult year with ongoing pressure from generics and on Avandia and the lack of new growth drivers to fill the gap.
Glaxo last year launched a 1.5 billion pound (3.1 billion dollars) program to cut costs, increase research and development and streamline its manufacturing business will deliver annual pretax cost savings of up to 700 million pounds (1.4 billion dollars) by 2010.
Shares in the London-based company were 6.6% lower at 1,090 pence (21.20 dollars) in early afternoon trade.