GLAXOSMITHKLINE has reported a 60% drop in profits for 2010 after it paid out £4bn to resolve legal disputes following claims about the alleged side-effects of some of its drugs.

The pharmaceuticals company, which has around 1,200 staff in the North East and Cumbria, has been settling long-standing legal claims, including many relating to its controversial diabetes drug Avandia, which has now been taken off the market in Europe following allegations it causes an increased risk of heart attacks.

Glaxo reported that pre-tax profits slumped 60% to £3.2bn in 2010, while sales were flat at £28.4bn. It made a loss of £476m in the final quarter of the year, in which it paid out £2.2bn in legal costs.

The company also announced plans to sell off some of its lesser known consumer brands, which are mainly sold in the US and Europe, to allow it to focus on its blockbuster names such as Lucozade, Sensodyne, Horlicks and Panadol.

The group said underlying sales – not including Avandia or herpes drug Valtrex, which is subject to competition after its patent expired – were up 4.5%.

The group also incurred £1.3bn of restructuring charges in 2010 as it cut costs and jobs across its global operations.

The company’s bid to save £2.2bn by 2012 has led to the loss of 4,000 jobs worldwide, including 200 at Barnard Castle and 300 in Ulverston in Cumbria over the last two years.

But it is considering Barnard Castle, Ulverston or Montrose in Scotland as the three possible sites for a new plant employing 1,000 people, which are part of a £500m expansion into new markets.

The company has invested more than £150m at its Barnard Castle site in the last two years and employs more than 800 staff there. The company also employs around 300 people at its Ulverston plant.

Glaxo plans to increase sales of its biggest brands and grow its presence in emerging markets as it reduces its dependence on selling white pills in western markets.

It claims it has a good pipeline of new products and expects to make progress developing drugs for diabetes and several types of cancer over the next year.

Chief executive Andrew Witty said he has no plans to buy Pfizer’s site in Kent after its US rival this week announced plans to close its research and development operation.

He added: “We don’t have any interest in the buildings as we already have a lot of our own facilities and we are making sure we are using those efficiently.

“I would say that at the appropriate moment we would want to talk to Pfizer about some of the very highly skilled people there and if they want to move to GSK, that’s something we would look at.”

A £50m capital fund that Glaxo plans to set up in the UK could potentially invest in staff from the Sandwich site, he added.

Glaxo announced the fund last year after Chancellor George Osborne said he would set up the patent box scheme, a 10% reduction in corporation tax on profits generated on intellectual property of products designed and manufactured in the UK, to encourage investment.