GlaxoSmithKline Shares Slump

Full-year EPS was 3% below the consensus estimate of analysts polled by Thomson First Call. Still, that performance, when measured in terms of a constant exchange rate, was 10% better than the EPS for 2002. Last year's revenue exceeded 2002's revenue by 5%.

For the three months ended Dec. 31, the company earned $1.41 billion, or 25 cents a share, excluding one-time charges. Otherwise, the company would have earned $1.6 billion, or 28 cents a share, on sales of $9.3 billion.

Using a constant exchange rate, the company's fourth quarter sales slipped 1% from the same period last year. Earnings per share fell 8% if one-time charges were excluded. EPS fell 19% if charges are included.

The company's fourth quarter was hurt by a settlement, announced last week, in which GlaxoSmithKline agreed to pay $175 million to wholesalers and other purchasers of the company's nonsteroidal anti-inflammatory drug Relafen. The company said the settlement ? in which plaintiffs alleged antitrust violations ? has been submitted to a district court in Massachusetts where the case has been pending since 2001.

GlaxoSmithKline, which said it believes it acted properly to protect its patent on Relafen, explained that it is taking a fourth-quarter charge of $361 million. That will cover this settlement, plus previous settlements with two drug companies and with chain drugstores. The charge also will apply to a pending Relafen antitrust case which is scheduled for trial in June.

The company also reported that it has received a subpoena from prosecutors Colorado regarding sales and promotional efforts for products between 1997 and 2004. The company didn't identify the products or provide details of the complaint. It said it was cooperating with the investigation which is "in its early stages."

The company reiterated Thursday that it has received a notice from the Internal Revenue Service stating that it owes $2.7 billion in back taxes relating to profits on certain products sold between 1989 and 1996. GlaxoSmithKline said that if it is forced to pay the full claim it also would be on the hook for $2.5 billion in interest. The company said similar tax issues remain for the 1997-2000.