Glaxo Profit Slips

Filed at 8:54 a.m. ET

LONDON (AP) GlaxoSmithKline PLC reported a 5.8 percent drop in third-quarter net profit on Wednesday after a slump in sales of its troubled diabetes drug Avandia and increasing generic competition to its established medicines in the Unites States.

Glaxo, the worlds second-largest pharmaceutical company, also announced a 1.5 billion pound ($3.1 billion) program to cut costs, increase research and development and streamline manufacturing.

Chief Executive Jean-Pierre Garnier said the program, which is designed to deliver annual pretax cost savings of up to 700 million pounds ($1.4 billion) by 2010 and improve the companys long-term productivity and efficiency, would include job cuts but he did not specify where or how many.

Glaxo posted net profit of 1.31 billion pounds ($2.68 billion) for the three months to Sept. 30, down from 1.39 billion pounds for the same period a year ago.

Revenue fell 2 percent to 5.48 billion pounds ($11.02 billion), largely due to a 7 percent decline in turnover in the United States, where stiffer generic competition combined with a 38 percent drop in sales of the Avandia family of drugs over the quarter.

Avandia was hurt by a New England Journal of Medicine article in May that said the drug raised the risk of heart attack by 43 percent. The FDA ruled in July that Avandia could remain on the market, but much of the damage had already been done.

Garnier said that Glaxo remained in discussions with the FDA about a new label for the drug, but said he had no knowledge of reports that regulator want a black box warning, the strongest product safety warning, about heart attack risk.

We are in conversation with the FDA, he said. We are not aware of any decision.

Garnier stressed the companys focus on strengthening its drugs pipeline and said it remained on track to meet its earnings guidance for the year, despite significant challenges, because of its broad product base.

We continue to strengthen our product portfolio with 15 products launched, approved or filed so far this year, and we remain very focused on delivering more from our late-stage pipeline, he said.

Garnier played down competition from AstraZeneca PLCs asthma treatment Symbicort the inhaler was launched earlier this year in the U.S., where its up against Glaxos top-selling Advair.

We have significant advantages and we hope to exploit them, he said. Needless to say, Symbicort will continue to grow but we are not overly concerned about it.

Advair sales were up 7 percent globally, and 5 percent in the United States.

Total pharmaceutical turnover over the quarter fell by 2 percent to 4.6 billion pounds ($9.42 billion) over the quarter.

However, sales of over-the-counter drugs rose 24 percent to 417 million pounds ($853.6 million).

Glaxo shares fell 1.7 percent to 1,239 pence ($25.36) on the London Stock Exchange.

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