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GlaxoSmithKline Dips on Downgrade

The drug giant's 2004 outlook prompts a downgrade and lower profit forecasts from analysts.

Shares of



slipped Friday after several analysts trimmed their 2004 earnings predictions and one analyst cut his rating on the London-based multinational drug company.

In early afternoon trading, shares of the company, which are traded as American despositary receipts, were down 96 cents, or 2.2%, at $42.43. The stock lost $1.76 Thursday after it released fourth-quarter and full-year earnings for 2003 and said that earnings per share in 2004 would be flat.

Vikram Sahu, a London-based analyst for Goldman Sachs, cut his rating late Thursday to outperform from in-line. Ten hours earlier, Sahu's initial report had maintained its pre-earnings release rating.

But Sahu's more detailed look at the company revealed a lack of flexibility in controlling costs, given that GlaxoSmithKline is facing a severe hit to revenue this year. The major culprit: previous patent expirations of two big drugs -- the antibiotic Augmentin and the antidepressant Paxil -- and the impending patent expiration by mid-2004 of the antidepressant Wellbutrin.

Though Sahu's report to clients maintained confidence in the company's drug research pipeline and ability to effectively launch new products, it added that any potential value "is unlikely to be realized over the next six months" due to the prospects of declining earnings of the next nine months. The company faces "a poorer-than-expected outlook for 2004 and lower expectations for 2005," Sahu wrote.