GlaxoSmithKline forced to cut outlook as European crisis bites

City A.M. Reporter
GLAXOSMITHKLINE warned yesterday that sales in 2012 would be flat as pressure on drug prices intensifies in Europe, due to government austerity measures aimed at curbing healthcare budgets.

The worsening situation in Europe is a challenge for the UK’s biggest drugmaker, which had previously set itself a goal of a return to sales growth this year after putting patent expiries and a record-breaking mis-selling fine in the US behind it.

Chief executive Andrew Witty said he saw a delay in the company’s return to growth rather than a change in the shape of its future growth curve as it overcomes past problems.

“It’s a question of timing – two or three quarters, if you will, being muted by the macro-economic effect of pricing in Europe,” he said.

Sales in Europe slumped eight per cent in the quarter, reflecting a one per cent volume decline and an unprecedented seven per cent fall in pricing. That year-on-year price decline might be at its worst point now, assuming there are no further shock moves by governments, Witty said.

Overall turnover was down four per cent from the same period a year ago at £6.46bn, generating core earnings per share (EPS) down five per cent at 26.4p.

GSK is taking further action to reduce costs in the face of the tough environment and said it expected new manufacturing process improvements to generate annual cost savings of around £500m by the end of 2015.