Glaxo looks to repurchase up to £2bn shares

Julian Harris
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GLAXOSMITHKLINE (GSK) posted a £476m loss for the final three months of 2010, after a $3.5bn (£2.2bn) legal charge over marketing practices.

The results compared with a profit of £2.25bn in the final quarter of 2009, but chief executive Andrew Witty remained upbeat, announcing GSK’s intention to buy back up to £2bn in shares.

The company is “finally coming through the headwinds” of recent times, according to Witty, although he admitted that 2011 will still be tough. Witty remains confident that GSK will enjoy sustained growth, with proceeds channelled towards dividends for shareholders, buying back shares, and buying “bolt on” companies.

However, GSK will not acquire “bolt ons” for the sake of it, he stressed. Purchasing new companies is “not a matter of life and death”, he said, allowing GSK to be “very disciplined on where we do acquisitions.”

Where opportunities arise, GSK will continue to look for acquisitions in emerging markets and in the field of vaccines. At the end of last year GSK purchased Chinese company Nanjing MeiRui Pharma (MeiRui) for $70m (£44.4m).

And Witty vehemently defended the company’s right to tax breaks from the new “patent box” scheme, in which corporation tax on profits from patented products are cut to 10 per cent. The UK has benefited hugely from innovations by companies like GSK, he said, stressing the arduous research procedures that are necessary for new drugs to be developed.

“For every 10,000 molecules synthesised, only 10 make it through to clinical trials,” he said.

GSK may look to pick up some of the intellectual capacity from the closure of Pfizer’s plant at Sandwich, Witty said, while insisting GSK is not interested in the plant itself.

And Witty blamed downward pricing pressures from foreign governments for the squeeze on pharmaceutical companies. In Europe this cost GSK £150m-£160m in sales revenue last year, he said.

For the year to 31 December, pre-tax profits fell from £7.89bn to £3.15bn on flat turnover of £28.4bn. The company declared a fourth-quarter dividend of 19p, making a total of 65p for the full year – up from 61p in 2009.