Glaxo admits ‘mistakes’ over US guilt

Announcing interim results, chief executive Sir Andrew Witty said he was “very sorry” for the group’s actions after Glaxo pleaded guilty this month to mis-promoting two medicines by seeking to persuade doctors to prescribe anti-depressant drug Paxil for children although it was not intended for under 18s and pushing the Wellbutrin drug for unapproved uses.

His comments came as the group announced plans to cut another £500m in costs after revealing a decline in sales and profits amid global economic turmoil.

Sir Andrew said he was “very sorry that we have had to deal with the echoes of the past”.

“We’re determined that this is never going to happen again,” he added.

Glaxo’s half-year results showed an eight per cent decline in second quarter underlying earnings to £2bn and a four per cent drop in sales to £6.5bn as a result of the eurozone woes and a tough US market.

The European business suffered an eight per cent sales drop in the quarter, while the US saw a six per cent fall in sales.

Glaxo said it was preparing to change its manufacturing process to deliver extra cost savings by 2015.

The Brentford-based company said the plans would not lead to factory closures but would focus on operating efficiencies.

Sir Andrew would not rule out job losses as a result of its £1.9bn proposed takeover of its American partner Human Genome Sciences (HGS).

Glaxo said job losses were “quite often unfortunately the case” following takeovers and confirmed it would look to cut out duplication following the deal to buy HGS, which employs around 1,100 staff.

Glaxo was hit by a seven per cent price cut across Europe in the second quarter, while sales volumes also dropped one per cent in the region. A tough second quarter left underlying operating profits three per cent lower in the first six months at £4.1bn after revenues fell two per cent to £13.1bn.

Sir Andrew said: “We are under no illusions that we must respond to the challenging economic environment we face.”

He added: “For the remainder of this year we will continue to look to maximise growth opportunities from key investment areas and take further action to reduce our cost base and implement financial efficiencies.”

It is hoping to launch eight new drugs and vaccines over the next two years but admitted sales and profit margins would likely remain flat in 2012.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: “Like Europe itself, Glaxo continues to kick the can down the road.

“Pricing pressures in both Europe and the US have impacted, with management again dangling the carrot of potential future drugs as a counterbalance.”