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GSK to announce more than 3,000 job cuts
FT, By Andrew Jack in London
January 31 2010
GlaxoSmithKline will this week announce reduced investment some disease areas and more than 3,000 job cuts as it intensifies its diversification away from its core pharmaceutical business.
The action - to be announced with its annual results on Thursday - follows a much larger restructuring by AstraZeneca, the UK competitor last week with 8,000 jobs losses as part of a $2bn five year fresh restructuring.
GSK will also add substantial fresh provisions, on top of a wide-ranging restructuring it unveiled two years ago which is still proceeding. It believes it is less exposed in the next few years to patent expiries than AstraZeneca, having already surmounted several in the past two years without a sharp net reduction in sales.
But GSK now is accelerating the strategy under Andrew Witty, its chief executive appointed two years ago, to diversify away from its dependency on core patented prescription medicines, and reallocate capital to fast growing activities, notably in consumer health and the emerging markets.
Mr Witty, who has abandoned offering guidance on future performance to analysts, will this week need to show that he is starting to achieve his goals in diversifying away from "white pills in western markets", as a way to counter the high risks of drug development and the slowdown in western markets for healthcare spending.
The fall in gross headcount at GSK in its traditional North American and West European pharmaceutical operations will be offset by fresh recruitment in emerging markets and non-pharmaceutical operations. It will include manufacturing, sales, administration and research staff.
The company, like its peers, is reducing marketing staff in western markets as tighter regulation and growing calls for cost effectiveness centralise decision making in a smaller number of healthcare bodies and insurers, and away from individual doctors.
The company is also expected to pare back some of its traditional therapy areas which are increasingly seen as less lucrative or where it assesses the science or competitive advantage to be low.
GSK will announce a significant one-off accounting gain in its fourth quarter results from spinning off its HIV activities into ViiV Healthcare, a joint venture with Pfizer. It will also update on flu vaccine sales, which have been reduced over initial expectations by a relatively mild pandemic and cancelled orders from governments.
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