GlaxoSmithKline, the UK’s largest drugmaker, appears poised to announce thousands of redundancies as it becomes the latest company in the sector to react to increasing low-cost competition for its patented products.
The company is expected to announce the cuts alongside its fourth-quarter results on Thursday. They are likely to be presented as an extension of the plan to achieve £750m in annual cost savings by 2010 that was presented in early 2007.
News of the likely cuts follows an announcement by AstraZeneca, another important UK-based drugmaker, of plans to cut 15,000 jobs by 2013.
Staff cuts by drugmakers reflect the companies’ concerns about the looming expiry of patents on several blockbuster drugs and intensifying concern about low-cost generic manufacturers, rather than the wider economic concerns affecting other sectors.
There is also increasing pressure worldwide from governments and insurance companies to bring down drug costs, which have soared in recent years as drug companies have benefited from their patents on drugs to treat widespread conditions such as stomach complaints and high cholesterol.
Pfizer, the industry’s largest company by turnover, last week announced a $68bn (£47bn) takeover of Wyeth, its rival, in an attempt to address similar issues.
GSK declined to comment about reports in several Sunday newspapers giving figures for the likely redundancies of between 6,000 and 10,000 from a worldwide workforce of 100,000. But the company seems certain to announce thousands of job losses.
Sales staff in the US are likely to be worst affected as sales efforts shift from individual practitioners to higher-level decision-makers in insurance companies and healthcare providers.
The problems for drugmakers revolve around their dependence on the high revenues generated by drugs during the 20 years they are under patent protection. Once patents expire, generic drug producers unburdened by the heavy research and development costs of the large makers can come in to make them for far less.
Among GSK’s strongest areas are drugs for central nervous system complaints, where it saw its patent for Seroxat, a popular antidepressant, expire during 2006.
Speculation persists that Andrew Witty, chief executive, would seek to improve GSK’s competitive position by an important takeover, as well as to cut costs. GSK has cut back on purchases of its own shares to form a
war chest of hundreds of millions of pounds that could go towards such a deal.
● The management team at Quantum Specials, which produces bespoke drugs not readily available from big drug manufacturers, has completed a £32.5m buy-out.
Backed by Lloyds TSB Development Capital, a mid-market private equity arm of Lloyds Banking Group, and Yorkshire Bank, the deal provides an exit for Phoenix Medical Supplies, a healthcare supplier and distributor, and several founding shareholders at the company, based in Co Durham.
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