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Improvements in Research and Manufacturing will Help Offset $1bn cost cutting, says GSK

News   •   Feb 07, 2013 15:24 GMT

First published in Fierce Biotech (7 Feb 2013)

In reaction to pricing pressure in Europe, GlaxoSmithKline ($GSK) aims to chop £1 billion ($1.57 billion) in annual spending in Europe, R&D and manufacturing by 2016, the drugmaker revealed today in its fourth-quarter earnings. The London-based pharma giant intends to seek cost reductions through technical improvements in research and manufacturing, but GSK CEO Andrew Witty expects job cuts to be part of the European cost savings.  

Talking with analysts today, Witty didn't reveal any numbers of jobs to be slashed through the savings plan but noted that the majority of the impact on workers would be in administrative and sales units in Europe. And while touting the 6 new drugs under review and data expected from late-stage studies of 9 new drugs over the next two years, GSK signaled its growing angst about the troubling economic situation in Europe and resulting pricing pressures on its business.

Glaxo expects to get the bulk of its cost savings in manufacturing and R&D through modernizing labs and research processes as well as new approaches to producing drugs rather than layoffs, a company spokeswoman told FierceBiotech in an email. The cutbacks are expected to cost the company £1.5 billion ($2.34 billion) and primarily impact Europe, where sales dropped 7% as European authorities clamped down on drug pricing and reimbursements, Bloomberg reported.

"We are very serious about looking for the right strategic response" in Europe, Witty told analysts in a meeting webcasted today. He noted that 80% of the market exists outside of Europe, presenting opportunities for the company in other regions.

2013 is bound to be an exciting year for GSK's vaunted pipeline and lineup of new meds under regulatory review. Since last year the company has filed for approval of 6 drugs including the inhaled asthma and COPD drug Breo, a LAMA/LABA med for COPD dubbed Anoro, a pair of melanoma drugs known as trametinib and dabrafenib, the HIV med dolutegravir and albiglutide for Type 2 diabetes.

With data from late-stage studies of 14 assets expected over the next two years, GSK watchers are in for a wild ride as not all the programs are expected to succeed. Shares of GSK lagged the European pharma index last year, but the company aims to mount a comeback by launching up to 15 products over the next three years.

"There will be lots of moments where I'm going to be very nervous, you're going to be very interested and we'll see how we both feel in the morning," Witty told analysts.

"[2013] is going to be one of those sorts of years," the CEO added. "It's a very different sort of atmosphere for us. Obviously there's going to be lots of twists and turns. Not everything is going to go smoothly."

Read more: Enthralled with pipeline, GSK's Witty targets £1B in annual cost cuts - FierceBiotech http://www.fiercebiotech.com/story/enthralled-pipeline-gsks-witty-targets-1b-annual-cost-cuts/2013-02-06#ixzz2KE8uebMb 
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