GlaxoSmithKline has emphatically ruled out joining the wave of takeover activity that is expected to engulf the global pharmaceuticals industry.

Drug companies around the world, struggling to maintain their profit margins as a number of important patents come up for expiry, are under pressure to merge as a means of slashing costs.

Pfizer, the world's biggest drugs company and the maker of Viagra, is leading the latest round of consolidation after announcing ten days ago plans for a $68 billion ($46.4 billion) takeover of Wyeth.

But Andrew Witty, chief executive of GSK, insisted yesterday that the world's No 2 drugmaker would stand aloof from such activity. He said: “There is no way we will be distracted by large-scale M&A going on in the sector — that's not for GlaxoSmithKline. Nothing that has happened in the past month has changed my view. You will see us make acquisitions but they will be small to medium-size and will not be a mega-merger.”

Mr Witty, who succeeded JP Garnier last May, said that the kind of acquisitions GSK was seeking would aim to boost its presence in emerging markets and in consumer health.

He confirmed that GSK, which has cut about 10,000 jobs since the beginning of last year, plans a further round of cutbacks. The company is aiming for annual cost savings of £1.7 billion by 2011 — up from the £700 million previously announced. Mr Witty declined to put a figure on the number of posts that could go, but said the pressure to cut costs was “significant”.

He added: “We are very conscious of the effect this programme will inevitably have on our employees and if options exist where we can achieve our financial goals and preserve jobs, we will do everything we can to do so.”

He was speaking as GSK reported a 21 per cent fall in operating profits for the last three months of 2008 to £2.1 billion. This was due mainly to a one-off hit of £517 million related to a five-year investigation by officials in Colorado into GSK's sales and marketing practices for its nine top-selling drugs since 1997.

Full year pre-tax profits dropped by 12 per cent, to £4.6 billion, as the expiry of patents on four key drugs helped to push down sales in the lucrative US market by 11 per cent to £8.9 billion. Wellbutrin XL and Paxil CR, the anti-depressants; Imitrex, the migraine pill; and Lamictal, the epilepsy drug, all faced competition from cut-price copycat versions in America last year.

Suggestions that Avandia, GSK's diabetes drug, might put patients at risk of a heart attack, pushed down its sales in America by 49 per cent to £434 million, and by 40 per cent worldwide, to £805 million.

On a brighter note, GSK benefited from a strong performance in the emerging economies, where full-year sales rose by 12 per cent to £2.3 billion.

Mr Witty said that GSK planned to continue diversification of the business on the basis that “the average revenues of the drugs of the future will yield less than the average revenues of the drugs of the past”.

He refused to give a forecast for 2009, breaking a tradition with previous years, but insisted that the change of policy had nothing to do with expected performance figures.

He said that he was entering 2009 “with confidence”.

GSK shares rose 9p to £12.77.

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