GSK promises growth this year after 2012 shortfall

GlaxoSmithKline, Britain’s biggest drugmaker, renewed its promise to return to growth this year, after failing to deliver a hoped-for sales and margin recovery in 2012.

GSK also announced a restructuring of European operations, drug manufacturing and research, designed to save at least £1 billion (€1.15 billion) annually by 2016, while it placed its Lucozade and Ribena drinks brands under strategic review.

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.

Yesterday, he predicted earnings per share, after stripping out some items, would grow by three to four per cent at constant exchange rates in 2013, with sales rising about one per cent. “2013 should be the first in a series of growth years for GSK,” Witty told reporters. 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.

That makes 2013 a crucial year for GSK’s pipeline, although the main impact on the sales line will be felt during 2014 and beyond – assuming the new medicines live up to expectations.

“Flat sales over the last year highlight the importance to GSK of the potential new product launches in 2013, as it looks to return to growth,” said Mick Cooper, analyst at Edison Investment Research.

Sales in the final quarter of 2012 fell three per cent to £6.80 billion (€7.9 billion).

GSK’s stock has underperformed in the past year, due to disappointment at its lack of growth, and it now languishes second to last among large European drugmakers in terms of sell-side analysts’ ratings, ahead only of AstraZeneca, according to Thomson Reuters data.

The shares were unchanged following the results, in line with a steady European drugs sector.