GSK promises return to growth

GlaxoSmithKline plans to cut costs in its struggling European drugs division and promised investors a return to growth this year after failing to deliver a hoped-for sales and margin recovery in 2012.

Britain's biggest drug-maker said a new programme to restructure European operations, drug manufacturing and research would save £1 billion annually by 2016, with related charges of £1.5 billion.

GSK also placed its Lucozade and Ribena drinks brands under strategic review - a process that could see the products repositioned, partnered with another company or sold off.

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.

Chief executive Andrew Witty hopes to do better this year.He predicted yesterday that earnings per share, after stripping out some items, would grow by 3 to 4 per cent at constant exchange rates in 2013, with sales rising about 1 per cent. "2013 should be the first in a series of growth years for GSK," Mr Witty told reporters.

However, the forecast 2013 pick-up in sales and earnings was less than some analysts had hoped, and Deutsche Bank analyst Mark Clark also noted GSK gave a cautious outlook for profit margins since these are only expected to improve "over the medium term".

GSK is relying on a clutch of new drugs to revive its fortunes in the mid-term, starting with six 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.

GSK's stock has underperformed in the past year due to disappointment at its lack of growth. It now languishes second to last among large European drug-makers in terms of sell-side analyst ratings. - Reuters