GlaxoSmithKline plans to eliminate an undisclosed number of employees as the drug maker expands its efforts to reduce costs.
The latest job cuts follow thousands of layoffs worldwide during the past two years and again will likely hurt GSK's Triangle workforce and the local economy. CEO Andrew Witty is slashing expenses to offset slowing sales of blockbuster drugs.
GSK announced this morning that it plans to expand previous cost-cutting efforts to save nearly $800 million more a year by 2012. The move will reduce research and development spending, which will effect its R&D hubs, including in Research Triangle Park.
"Where possible, we will continue to try to preserve jobs," Witty said in a prepared statement. "As before, we will not be providing targets for job reductions and we will announce restructuring outcomes once employees" and unions are notified.
As part of the shift, GSK will stop research into new drugs for depression and pain, he said.
"They're wrestling with how to change the business model to reflect market trends," said Richard Kouri, director of the BioSciences Management Initiative at N.C. State's College of Management. Most big drug makers are trying to reinvent themselves as "quicker, more flexible companies, more like little biotechnology companies."
GSK announced the job cuts this morning as the British company released stronger results for the fourth quarter and full year. Fourth-quarter profit jumped 66 percent to $2.68 billion, while revenue rose to $13.03 billion. The results were bolstered partly by increased sales of H1N1 vaccine and the anti-flu drug Relenza.
The company employs nearly 100,000 people worldwide, including about
5,000 in the Triangle. Most of those perform research, sales or other
functions out of GSK's North American headquarters in RTP.
It's too soon to tell how many local jobs could be eliminated, said GSK spokeswoman Mary Anne Rhyne.
"The U.S. business will be expected to make a significant contribution to the savings goal," she said. "We do not anticipate any across the board reduction in force to meet that goal. We will be looking at how to reduce infrastructure costs. That includes employees, but also includes buildings and the overhead cost of doing business."
Company officials will announce decisions about how to reduce costs in coming months, she added.
GSK's local workforce includes 4,200 people in RTP, about half on the R&D side, and another 720 at a manufacturing plant in Zebulon. The RTP total declined by about 600 jobs as part of a sales force restructuring that was announced in Feb. 2008.
Most big drug makers are taking similar cost-cutting steps, including GSK rivals Pfizer and AstraZeneca.
"It's going to take a couple of years before we have a good idea of whether or not the industry's R&D machine is on track and more efficient," said Linda Bannister, who follows GSK's stock for Edward Jones. "The last thing you want to do is cut too much, and negatively impact the company's ability to grow over the long term."
Bannister rates GSK a "buy," saying that Wall Street isn't giving the company enough credit for its efforts to develop and acquire promising new drugs.
GSK American depositary receipts, similar to common shares for foreign companies, closed Wednesday at $38.92, and have fallen 8 percent so far this year.
Witty discusses the latest financial results and cost-cutting efforts at the company's Web site here.