UPDATE 3-Glaxo slashes costs further, no 2009 forecast

* Glaxo extends cost cutting, no interest in mega-mergers

* Not giving specific 2009 earnings guidance

* Q4 sales up 16 percent, ahead of consensus

* Shares reverse losses, up 0.6 percent

(Adds analyst reactions, comment on M&A, latest shares)

By Ben Hirschler

LONDON, Feb 5 (Reuters) - GlaxoSmithKline Plc (GSK.L) is slashing costs and jobs in a new round of restructuring which shows the pressures building on big drugmakers as cheap generics eat into sales.

But the world's second biggest drug company said on Thursday it had no intention of following market leader Pfizer Inc (PFE.N) in embarking on a new phase of mega-mergers.

In a surprise move, Glaxo also said it had decided not to give specific guidance on earnings for 2009. The company said the decision was not connected to performance and was designed to focus investor attention on its long-term goals.

The British-based group now aims to achieve annual savings of 1.7 billion pounds ($2.5 billion) by 2011, up from 0.7 billion estimated previously.

Glaxo did not spell out the number of jobs it would cut as a result but analysts expect thousands more positions to be shed from a global workforce of around 100,000.

Its expanded cost reduction programme is the latest in a series of cutbacks across the sector.

AstraZeneca Plc (AZN.L) last week announced 6,000 job cuts and Pfizer, which has agreed to buy Wyeth WYE.N, plans to cut 15 percent of the combined workforce, or about 19,000 jobs.

Glaxo's fourth-quarter sales rose 16 percent to 6.9 billion pounds, flattered by a weak British pound. But earnings per share before major restructuring costs were hit by big legal charges, rising only 9 percent to 26.7 pence.

Analysts polled by Reuters Estimates had on average forecast sales of 6.6 billion pounds and EPS of 27.6p, although not all the earnings figures had included the latest legal charges.

"They ticked the box on 2008 results," said Jeffrey Holford, an analyst at stockbroker Jefferies.

"We got a bit of a bombshell in terms of them not giving guidance ... but it appears to be a general policy. They are moving to a more opaque guidance perspective for the market, probably to give themselves some breathing room."

Glaxo's decision follows poorly received outlook statements from European rivals AstraZeneca, Roche Holding AG (ROG.VX) and Novartis AG (NOVN.VX) this week and last.

Simon Mather, an analyst with WestLB, noted some key product lines -- including Advair for asthma and respiratory disorders, vaccines and non-prescription remedies -- had performed better than expected.

Shares in the company, which had been 2.3 percent lower ahead of the results, were 0.6 percent higher at 1,275 pence by 1340 GMT, outperforming a 0.3 percent drop for the European healthcare sector .SXDP.

DEFENDING PROFIT MARGINS

Drugmakers are struggling to defend profit margins in the face of a wave of patent expiries. With few new medicines emerging from research labs and sales of blockbusters evaporating, the industry simply cannot sustain its current size, analysts say.

Glaxo itself faces cheap generic competition to a range of products, such as Lamictal for epilepsy and Wellbutrin for depression.

One option for large manufacturers is to merge and strip out costs, as Pfizer plans to do with Wyeth. But Glaxo Chief Executive Andrew Witty rejected this approach.

"There is no way we are going to be distracted by large-scale M&A within the pharmaceutical sector -- that's not for GlaxoSmithKline," he told reporters.

Instead, he plans to look at small and medium-sized deals to build Glaxo presence in emerging markets and consumer health.

Because the group sells the vast majority of its products abroad, it is currently basking in the effects of the pound's sharp fall.

Sterling's slide is expected to continue to flatter reported results through 2009 but Witty, who took over last year, has his eye on underlying margins excluding currency effects.

Glaxo shares trade on 11.6 times forecast 2009 earnings, according to Reuters data, well above the 7.4 times for rival AstraZeneca, reflecting hopes for its pipeline of new drugs.

Witty said Glaxo scientists were making progress on a number of projects, including cancer drug pazopanib which has now been filed with U.S. regulators.

The company also said it had begun final-stage Phase III trials for its potential diabetes drug Syncria. (Editing by Paul Hoskins and Jon Loades-Carter)