Glaxo meets profit forecast

Not enough drugs emerging from the GSK pipeline?

GlaxoSmithKline, the world's second biggest drug maker, has reported a 13% rise in annual pre-tax profit to £5.327bn ($7.689m).

The figure was in the middle of the range of analyst forecasts.

In a statement, chief executive Jean-Pierre Garnier said the results showed the company - recently created from the merger of Glaxo Wellcome and SmithKline Beecham - was in good shape and "off to a strong start".

"Clearly our employees remained focused on maintaining the momentum of our separate businesses, despite the distraction of integration planning, and delivered excellent results."

The profit and loss statement showed that the merger transaction had cost £121m.

Sales rose 12% to £18.1bn.

Not enough new drugs

Investors reacted positively, with the company's shares closing 4% up at 1,920 pence.

However, some analysts said they were still to be fully convinced that the merger was working.

They said GSK had not managed to prove the case for its high research and development spending - at £2.5bn a year second only to Pfizer in the industry.

So far, the company had not developed enough new drugs to justify the spending. And this perceived failing had held back the share price, they said.

Recent setbacks have included the withdrawal of irritable bowel syndrome treatment Lotronex because of health risks, the denial of approval in the US for antibiotic Factive and delays to the launch of a new diabetes drug.

The dribble of new drugs from GSK's own production line means the company is likely to want to boost its portfolio through acquisitions and partnerships with rivals, analysts said.

Cost savings achieved by the merger would free up the cash for this, they said.

Creative and flexible

Analysts said the presence of Mr Garnier at the top of the company was a positive sign.

He was formerly chief executive of SmithKline, which analysts said had proved to be a creative and flexible company in recent years whereas Glaxo's growth had been more dependent on mergers and acquisitions.

Looking ahead, GSK would be hoping that new asthma drug Advair/Seretide would drive growth.

GSK said the drug achieved sales of £208m in 2000 and made strong gains in market share in the UK and Germany.

A US launch is planned for April.

Glaxo and SmithKline finally combined in 2000. The failure of previous merger plans was blamed on a personality clash between then SmithKline head Jan Leschly and Glaxo chairman Sir Richard Sykes.