Andrew Witty

GSK confirms job cuts but avoids specifics

pharmafile | February 5, 2010 | News story | Research and Development, Sales and Marketing 2009 financials, GlaxoSmithKline 

GlaxoSmithKline has sidestepped questions about the internal fall-out from its new plan to slash R&D infrastructure costs.

Presenting the company’s 2009 results, chief executive Andrew Witty refused to be drawn on specific numbers of redundancies but admitted there would be job losses.

The cuts are part of a programme to save around £500 million in the next two years, and a consultation process is underway, Witty said.

These savings would be on top of GSK’s previous restructuring, which is on course to deliver £1.7 billion by next year.

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“I don’t like to see anybody leave the organisation or for there to be any job losses,” he said.

“But the reality is that we do from time to time need to look at ways we can improve our probabilities of success. The proposals we’re making today are exactly within that theme.”

The company was “continually looking for how we might improve the rate of return” on R&D, he added.

GSK will look at reducing fixed costs – essentially bricks and mortar – and at abandoning research areas it feels are less likely to bear fruit.

Neuroscience, pain and depression are therapy areas which may fall by the wayside for GSK.

Meanwhile “fixed buildings” are a “hangover of the creation of the modern R&D industry in the 1980s”, Witty explained.

“Today everything is more virtual, more partnership-oriented.”

Despite the proposed changes, Witty said he was “completely confident and positive” about his R&D strategy and pointed to the £1.3 billion of new product sales in GSK’s full-year 2009 results.

GlaxoSmithKline’s 2009 results

GSK saw a 3% rise in sales last year to £28.3 billion, the first time it has had positive sales growth since 2007, with operating profit for the year reaching £8.4 billion.

Pharma’s share of turnover was up 2% to £23.7 billion on the back of pandemic-related products, including H1N1 vaccine products and flu drug Relenza, the latter seeing sales rise from £57 million in 2008 to £720 million in 2009.

There was also growth for GSK’s consumer healthcare business, where turnover rose 7% to £4.6 billion.

But generics remained a threat to the company and during 2009 it lost more than £1.4 billion of sales to cheaper copies in the US market during the year, Witty said, with Avandia sales down 16% to £771 millon.

GSK’s HIV portfolio was also hit hard, but pharma sales in emerging markets grew 20%, representing 10% of group turnover.

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