U.K. pharmaceutical company GlaxoSmithKline is looking to cut costs further this year as it reported a sharp drop in fourth-quarter profit on the back of problems in Europe.

The company says Wednesday it made a net profit of 839 million pounds ($1.31 billion) in the final three months of 2012, down nearly 35 percent on the previous year. Over the year it made a profit of 4.74 billion pounds against 2011's 5.46 billion pounds.

Glaxo blamed the tough European environment for a 3 percent drop in sales 2012 and said the impact of discounted prices dented growth by around 6 percentage points.

To counter its difficulties, it said it would step up its cost-cutting program, particularly in Europe, to deliver savings of at least 1 billion pounds in 2016.