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GSK Could Cut Thousands More

GSK Could Cut Thousands More [The News And Observer, Raleigh, N.C.]

From News & Observer (Raleigh, NC) (February 2, 2010)

Feb. 2--Drugmaker GlaxoSmithKline, which has cut hundreds of Triangle jobs in the past two years, will announce another large round of layoffs Thursday when it reports its latest financial results, a British newspaper reports.

GlaxoSmithKline employs about 5,000 people in this region, mostly at its North American headquarters in Research Triangle Park but also at a factory in Zebulon. GSK, which is based in London, has been slashing expenses under CEO Andrew Witty to offset slowing sales of best-selling drugs amid increasing competition from cheaper, generic medicines.

Now the company is preparing to announce plans to eliminate 4,000 jobs, nearly half at its research hubs, one of which is at RTP, the Sunday Times of London reports. GSK "will scale down activities at research facilities in Britain, across Europe and in the United States as it builds its activities in emerging markets," the newspaper reports. The company employs about 100,000 worldwide.

"Some say the pharmaceutical industry has hit a wall, with the pace of new discoveries slowing and worries about the potential for price controls down the road," said N.C. State University economist Michael Walden. "Both these conditions would point to cost-cutting measures, and labor is usually the largest cost to cut."

GSK’s layoffs could hurt the Triangle’s economy as researchers and scientists are thrown out of work.

"For every job lost, especially the high-paying jobs at companies such as GSK, it has a multiplier effect on the economy as that money is not circulated in this region," said W. Clay Hamner, a professor at UNC’s Kenan-Flagler Business School. "The housing market gets weaker, the service sector loses customers, etc. ... It also affects demand for office space, air service, hotel rooms, restaurants, etc."

GSK officials typically refuse to share detailed information on how layoffs affect its Triangle work force. Nearly a year ago, the company cut an undisclosed number of workers at a customer response center in RTP.

Company spokeswoman Mary Anne Rhyne declined to comment on the Sunday Times report, citing the "quiet period" that comes before quarterly and year-end results are announced.

"We have said that we are continuously seeking to simplify our business and ensure that we are positioned to meet the current and evolving needs of the marketplace," she said.

GSK announced a first cost-cutting initiative in October 2007, eliminating thousands of jobs worldwide, and then it expanded that effort in February 2009. Hundreds of local employees have lost their jobs in those moves.

The company sells products including the asthma treatment Advair, flu drug Relenza and smoking-cessation aid Nicorette. Under Witty’s leadership, GSK has been buying promising new products and companies to bolster its pipeline of medicines.

The company has been expanding in emerging markets such as India, where demand for new drugs is booming. "The testing and development of new drugs will be more profitable if developed there," Hamner said. "Also, research is cheaper and very good in places such as India today."

In a recent setback for GSK, fourth-quarter sales of H1N1 flu vaccines weren’t as brisk as anticipated. France and other countries reduced orders as the panic over a pandemic eased.

Most other large drugmakers have taken similar cost-cutting steps in recent years. Last week, rival Astra Zeneca announced plans to slash an additional 8,000 workers. or 919-829-4572

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Posted: February 2010