* Restructuring to save at least 1 bln pounds a year by 2016
* 2013 core EPS seen increasing 3-4 pct on sales up 1 pct
* Strategic review launched on future of Lucozade and Ribena
* Q4 sales 6.80 bln pounds vs consensus forecast 6.88 bln
* Q4 core EPS 32.6 pence vs consensus forecast 31.3 pence
By Ben Hirschler
LONDON, Feb 6 GlaxoSmithKline plans to
cut costs in its struggling European drugs division and promised
investors a return to growth this year, after failing to deliver
a hoped-for sales and margin recovery in 2012.
Britain's biggest drugmaker said a new programme to
restructure European operations, drug manufacturing and research
would save at least 1 billion pounds ($1.6 billion) annually by
2016, with related charges of 1.5 billion pounds.
GSK also placed its Lucozade and Ribena drinks brands under
strategic review - a process that could see the products
repositioned, partnered with another company, or sold off.
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.
He predicted on Wednesday that earnings per share, after
stripping out some items, would grow by 3 to 4 percent at
constant exchange rates in 2013, with sales rising about 1
percent. "2013 should be the first in a series of growth years
for GSK," Witty told reporters.
Still, the forecast 2013 pick-up in sales and earnings was
less than some analysts had hoped and Deutsche Bank analyst Mark
Clark also noted GSK gave a cautious outlook for profit margins,
since these are only expected to improve "over the medium term".
Europe has been a weak point for many drugmakers but GSK's
portfolio has been particularly hard hit by government budget
cuts. As a result, Witty said he was taking action to "reduce
costs, improve efficiencies and reallocate resources".
The action in Europe will involve some job cuts but he
declined to go into details.
WAITING FOR SIX NEW DRUGS
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
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, an analyst at Edison
Sales in the final quarter of 2012 fell 3 percent to 6.80
billion pounds, generating core earnings per share (EPS) up 4
percent at 32.6 pence.
Analysts, on average, had forecast sales of 6.88 billion
pounds and core EPS, which excludes certain items, of 31.3p,
according to Thomson Reuters I/B/E/S.
The results got a muted response from investors, although
there was some relief that GSK did not miss earnings forecasts
as it did in the four preceding quarters.
The shares were unchanged following the results, in line
with a steady European drugs sector.
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 analyst ratings, ahead only of AstraZeneca,
according to Thomson Reuters data.
With a busy portfolio of experimental drugs nearing the
market, Witty said he had a "low appetite" for acquisitions and
would return cash to shareholders if the company did not find
As was the case last year, GSK has set itself a modest
target of buying back between 1 billion and 2 billion pounds in
stock this year. But Witty said that figure could be increased
during 2013, as was the case in 2012.
Although GSK is not champing at the bit for acquisitions,
Witty said he was always looking at opportunities in emerging
markets and consumer healthcare, two areas where the company
sees good growth prospects.
Witty has for several years pushed a diversification
strategy designed to cut the drugmaker's traditional reliance on
"white pills in Western markets".