GSK Tightens Its Belt

Oct 31, 2007
By Pharmaceutical Executive Editors

GlaxoSmithKline finally revealed its restructuring plan in last week's quarterly report, and the news isn't good for employees. In order to save approximately $1.4 billion by 2010, the company plans to shutter manufacturing plants and move some of the production overseas.

"We are very conscious that these initiatives will impact our staff in certain areas of our business, and we regret that job reductions will be a necessary part of this program," said CEO JP Garnier said in a release. "However, by making the changes we envision, GSK will be better placed to address the challenges we face in 2008 and be in a stronger position to create long-term value for patients and shareholders."

Why the bad news? Blame can largely be placed on the drop in sales of Avandia, which fell 48 percent in the United States alone. And things may worsen now that the drug has received a black box warning for heart stress.

Other points of note:

  • Seretide/Advair (fluticasone/salmeterol) sales were up 7 percent from Q3 2006 to Q3 2007
  • Vaccine sales, driven by Fluarix and FluLaval, were up 49 percent
  • Sales of the antiemetic Zofran (ondansetron) were down 86 percent, and Wellbutrin XL was down 41 percent (attributed to generic competition)
  • OTC sales were up 24 percent

According to Michael Steiner, principal with wealth-management firm RegentAtlantic Capital, the plan to save money through outsourcing is becoming an industrywide trend during restructuring.

"One of the bullet points on the quarterly presentation is about exploiting global opportunities, and the third sub-bullet pertains to labor costs arbitrage—that means that any jobs, any positions that can be outsourced to China or India at a lower cost offer an attractive alternative," Steiner said in an interview with Pharm Exec. "You look at who the up-and-coming crop of scientists are, and a lot of them are coming from Asia and are going to school in the States in the EU and are taking their craft and expertise back home."

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