GSK injects extra £320m into pension fund after first fall in earnings

GlaxoSmithKline, the UK's biggest drug maker, has been forced to pump an extra £320m into its pension fund, which has plunged to a £1.3bn deficit.

News of the top-up came as GSK posted its first-ever decline in quarterly earnings. Nevertheless Jean-Pierre Garnier, the chief executive, said he would press for an improvement to the pay of the company's top executives and scientists.

Mr Garnier said the pension fund had lost almost a third of its value since the start of the bear market in equities, and the company may make further payments this year.

"We decided to put in £320m just in case, even though this is a very long-term issue. We just wanted to give confidence to everybody, especially our employees, that we would not let the deficit go too far. We could add more in the future, but we will wait to see how the markets act.

The £4bn pension fund covers GSK's 100,000 global employees. Under the new accounting rule FRS 17, which provides a snapshot of the funds assets, it was £1.3bn shy of being able to meet future liabilities when the calculation was made at the end of last year. But Mr Garnier said: "We are not like a car industry pension fund, with lots of retirees, we are more like a Microsoft. We are a young company and we have expanded the number of employees in recent years."

Though the weak dollar meant GSK's profit fell 1 per cent to £1.7bn in the last quarter of 2002, Mr Garnier said newly-launched drugs will make up for the loss of sales from Augmentin, its blockbuster antibiotic, this year. "There are many rockets attached to the mothership," he said.

He also expressed confidence that shareholders would accept the need to improve pay and bonus packages for top executives and scientists at the company, even though a bruising battle to double his own package to £11m ended with a shareholder revolt.