Jean-Pierre Garnier, the chief executive of GlaxoSmithKline, issued a thinly veiled attack on AstraZeneca yesterday when he criticised the high prices that some pharmaceutical companies were paying for preclinical drugs.

“Why would you pay big money for an early stage drug?” Dr Garnier asked journalists after a briefing on GlaxoSmithKline’s annual results. “Over 90 per cent of them fail . . . I think these people are going to regret it.”

Dr Garnier’s comments came days after AstraZeneca, his company’s UK arch rival, announced that it would pay up to $810 million (£410 million) to license two drugs for smoker’s cough and obesity that have not yet entered Phase I clinical trials.

The upfront payments were much lower and the remainder of the cash will be paid in stages, dependent on the drugs’ success in trials. Nonetheless, the deals have stoked a debate over the prices some companies are willing to pay to gain access to new drugs and bolster their pipelines.

Dr Garnier also hit out at the decision by some drugs companies, including AstraZeneca and Pfizer, the US giant, to cut thousands of jobs in response to growing competition from generic drug manufacturers and the loss of key drug patents. “We don’t think that’s good management,” he said.

Last week AstraZeneca announced that it would cut 3,000 jobs, or 4.5 per cent of its workforce. Pfizer made a similar move last month.

Dr Garnier added that GlaxoSmithKline, Britain’s largest drugs company, was committed to good cost management “all the time”.

He was speaking after the group reported a 19 per cent surge in annual profits to a record £7.8 billion and unveiled plans to open three big drug research centres to focus on new disease areas.

The company’s turnover increased by 9 per cent last year to £23.2 billion compared with £21.7 billion in 2005, driven by strong sales of Avandia and Advair, its medicines for diabetes and asthma, especially in the US. Globally, the two drugs generated revenues of £1.6 billion and £3.3 billion respectively last year.

Dr Garnier admitted that the company would offset increased pressure from generic versions of its drugs this year with five product launches, including Tykerb, a breast cancer drug, and Cervarix, a cervical cancer vaccine. The company predicted earnings per share growth of 8 per cent to 10 per cent this year.

Peter Cartwright, pharmaceuticals analyst at Evolution Securities, said that the company would face additional pressure this year because of the weak US dollar, which undermines the sterling value of sales in America, the group’s biggest single market.

Dr Garnier refused to rule out the possibility of a big acquisition but played down its likelihood, saying that the pipe-line “is our No 1 priority”. He said: “We would be very picky about any large transaction.”

GSK figures

Turnover up 9 per cent to £23.2bn

Pretax profits up 19 per cent to £7.8bn

Top-selling products:

Seretide/Advair: £3.3bn

Avandia: £1.6bn

Lamictal: £996m

Valtrex: £845m

Five new product launches expected in 2007

Tykerb for breast cancer

Cervarix for cervical cancer

Allermist for allergic rhinitis

Trexima for migraines

Coreg CR for cardiovascular conditions

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