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GlaxoSmithKline has announced third quarter profits weighed down by the European ban of diabetes drug Avandia and falling demand for flu vaccines.

The company made £1.29bn ($2bn) in the period, down 3.5% from a year ago.

Sales fell 2% versus a year earlier, but were up 2% if Avandia and pandemic drug sales are excluded, the firm said.

European regulators banned the diabetes drug in September, while sales in the US have also been restricted, because of a suspected link to heart disease.

Sales of Glaxo's herpes drug, Valtrez, were also hurt by growing competition from similar generic rival products after its patent expired, .

Although a fall in sales was anticipated by most analysts, the figures nonetheless disappointed markets, with Glaxo's share price falling more than 2% on the news.

Chief executive Andrew Witty blamed US healthcare reform and European austerity measures for the poor performance.

"Despite the challenging environment we face, I remain confident that [Glaxo]'s outlook continues to improve," said Mr Witty.

The disappointing results follow on from a second quarter in which Glaxo recorded a loss due to one-off charges for restructuring costs as well as legal costs associated with Avandia among others.