GlaxoSmithKline's Net Falls As Avandia Sales Plummet

[JohnMack]

Source: Wall Street Journal

Europe's Largest Drug Maker
Unveils Cost-Saving Program
By ELENA BERTON

LONDON -- GlaxoSmithKline PLC Wednesday said third-quarter net profit fell 5.8% due to a sharp drop in sales of diabetes drug Avandia and generic competition for several older drugs in the U.S.

The world's second largest drug maker after Pfizer Inc. also unveiled a £1.5 billion ($3.08 billion) cost-saving program to partly mitigate next year's impact on earnings from generic competition and lower Avandia sales.

Net income for the quarter ended Sept. 30 was £1.31 billion, down from £1.39 billion a year earlier. Revenue declined 2.9% to £5.48 billion from £5.64 billion, impacted by generic competition in the U.S. and plummeting Avandia sales.

Sales of the Avandia family of drugs fell 38% to £225 million, with U.S. sales down 48% to £130 million, as safety concerns prompted by an article published in May in the New England Journal of Medicine affected prescriptions.

The cost-saving move, which follows a similar plan announced by Swiss rival Novartis AG last week, had been expected by several analysts. Among the measures considered for the program, GlaxoSmithKline will streamline its manufacturing operations and change the way it markets its products.

Speaking to reporters during a conference call, Chief Executive Jean-Pierre Garnier said job losses will be unavoidable, but declined to specify the extent of the job cuts being planned. Dr. Garnier, who is due to retire in May next year, will be succeeded by Andrew Witty, currently head of GlaxoSmithKline's European pharmaceutical operations.

Still, the Brentford, England-based company reaffirmed its outlook for the current fiscal year, targeting earnings-per-share growth of between 8% and 10% at constant exchange rates. "GlaxoSmithKline remains on track to meet its earnings guidance for the year, despite significant challenges," Dr. Garnier said in a statement.

Write to Elena Berton at elena.berton@dowjones.com