GlaxoSmithKline Shares Slump

"Our goal is not to go through a major merger," said Garnier. He said the company's first priority is to nurture its drug research pipeline whose mixture of early stage and late stage experimental products he likened to a "promising teenager" who has the prospects for becoming "a person of standing in the community."

Garnier said his company's size and its promising pipeline will enable it to take the heavy revenue hits of major drugs coming off patent.

GlaxoSmithKline "has delivered on its 2003 growth forecast of high-single digit or better," said Vikram Sahu, a Goldman Sachs analyst based in London. "This is a creditable achievement," given the impact of generic sales last year on Paxil and Augmentin, he added in his research report.

Sahu has been predicting 2004 earnings per share growth in the mid-single digits; but even though the company said 2004 EPS would be flat relative to last year, Sahu maintained his outperform rating. (He doesn't own shares, but his firm expects to receive or seek compensation for investment banking services in the next three months from the company.)

Mark Clark, a London-based analyst for Deutsche Bank, is keeping his hold recommendation, saying he might have to reduce his 2004 prediction by 7% or so, assuming the British remains at an exchange rate of $1.90 . (GlaxoSmithKline's 2003 year-end and fourth-quarter calculations use a conversion rate of $1.64 to the pound.).

Clark said the company's comments about 2004 represent "a much more conservative outlook than we had expected." He added that the downside risks to the stock, in addition to the impact of generic drugs, include research and development setbacks and tougher European health care policies. (Clark doesn't own shares, although his firm has an extensive investment banking relationship with GlaxoSmithKline.

For the full year, GlaxoSmithKline earned $7.35 billion, or $1.26 a share, on revenue of $35.2 billion. The figure excludes several one-time charges, which, if added to the total. Otherwise, earnings would have been $7.8 billion, or $1.35 a share.