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Glaxo posts Q4 loss on Avandia charge

Glaxo posts Q4 loss on Avandia charge

GlaxoSmithKline PLC, the world's second largest drug maker by revenue, reported a fourth-quarter loss on Thursday after taking a previously-flagged massive charge to provide for U.S. litigation over its diabetes drug, Avandia.
But the London-based company also had good news for investors, reinstating its share buyback program and increasing its full-year dividend payment as it banked on a stronger pipeline of potential drugs to boost future earnings.
Glaxo posted a net loss of 690 million pounds ($1.12 billion) for the three months to Dec. 31, compared to a profit of 1.63 billion pounds a year ago, after taking a 2.2 billion pound charge to settle claims relating to Avandia and past U.S. sales practices.
European regulators ordered Avandia off the market and the U.S. Food and Drug Administration restricted its use last September because of evidence that the drug increased the risk of heart attacks.
Revenue dropped 13 percent to 7.19 billion pounds, from 8.09 billion.
Full-year net profit dropped to 1.63 billion pounds from 5.53 billion pounds, while revenue dipped 1 percent to 28.39 billion pounds from 28.37 billion pounds.
Chief Executive Andrew Witty said the earnings were hit by a "wash out" of sales of flu pandemic products and its herpes treatment Valtrex amid generic competition as well as the Avandia charge that would continue through the first half of this year, but dissipate after that.
"Those two factors led to depressed reported sales and earnings figures for 2010," Witty told reporters. "But I think it's absolutely crucial to look through these factors."
Discounting the Avandia effect, sales were up 4.5 percent, and Witty said the company was stregthening its future revenue streams in key areas _ emerging markets, consumer healthcare and vaccines.
That prompted enough confidence to restore a long-term share repurchase program, which was frozen in 2008 as the company faced increased generic competition and regulatory changes in the U.S. The program is pegged at 1-2 billion pounds this year.
The full-year dividend was lifted 7 percent to 65 pence.
The market welcomed the returns to investors, which Glaxo shares rising 2.6 percent to 1,157 pence in mid-afternoon trade.
Glaxo's smaller British rival AstraZeneca PLC last week doubled its 2011 buyback program to $4 billion, while U.S. competitor Pfizer Inc. this week pledged to repurchase $5 billion this year.
Witty said that Glaxo would be "very interested" in speaking with Pfizer about potentially employing some of the U.S. company's 2,400 staff that are expected to be left jobless after the closure of its purpose-built facilities in Sandwich, Kent in southern England.
"We are not interested in the buildings, but we are very interested in some of the people," Witty said.
Glaxo's pharmaceutical sales fell 16 percent over 2010 to 5.55 billion pounds, as generics cut sales of Valtrex by 60 percent to 96 million, while the Avandia sales slumped 76 percent to 49 million pounds. Sales of flu vaccine Relenza dropped 84 percent to 121 million pounds as government orders disappeared. Among strong earners were breast cancer drug tykerb, up 34 percent at 227 million pounds, Arixtra bronchial asthma treatment, up 19 percent at 310 million pounds, prostate cancer drug Avodart, up 18 percent to 629 million pounds and fish oil pill Lovaza, up 17 percent at 530 million pounds.
For the future, Witty stressed that the company has around 30 products in late stage development, including a potential key new respiratory drug.
He added that Glaxo plans to focus its increasingly lucrative Consumer Healthcare business around a portfolio of "priority" brands and the emerging markets. As a result, the company will sell off around 100 smaller brands that represent around 10 percent of sales in that market.
Sales of consumer healthcare products, a range that includes Macleans toothpaste and Beechams cold relief, rose by 5 percent over 2010 to 5 billion pounds. Other key brands such as Sensodyne, Lucozade and Horlicks are also not under threat.


Updated : 2021-10-20 03:31 GMT+08:00