GSK £1bn savings plan to hit manufacture towards 2017, but UK likely immune

By Dan Stanton contact

- Last updated on GMT

GSK is looking to save £1bn a year over the next three years
GSK is looking to save £1bn a year over the next three years

Related tags: Investment

GlaxoSmithKline plans to cut manufacturing, sales and R&D as part of a three year plan to save £1bn ($1.6bn) annually. 

“The year 2014 has been painful for GSK,”​ CEO Sir Andrew Witty told journalists in a media call yesterday after the firm reported sales for the first nine months of £16.8bn, a 14% drop on the same period 2013, and a profit of £1.8bn, down 42%.

In response, GSK announced a restructuring programme to refocus its global pharmaceuticals business, which it believes will result in annual cost savings of approximately £1bn over the next three years.

Witty did not go into specifics but dis say the restructuring “will be blended across different parts of the organisation, but as always, you should expect SG&A [Selling, General and Administrative] savings and to some degree R&D savings to come at the front and the manufacturing savings to come at the back end.”

Initial restructuring next year is expected to be relatively small but will help offset some of the earnings impact of declining sales in the firm’s respiratory portfolio, which was down 8% in the third quarter due to the encroachment of competition against GSK’s blockbuster drug Advair​.

Panicky in the UK?

As far as the restructuring programme for pharmaceuticals is concerned, this will of course affect jobs around the world​,” Witty said. However, the UK-headquartered multinational does not expect a significant loss of jobs or investment in its homeland.

“Every single manufacturing and research centre that we have in the UK is the subject of investment,”​ he told stakeholders. “Overall, our huge investment programme here in Britain, with new factories and extending factories, investing in R&D here in Britain and the Novartis transaction, means that the UK is likely to be maintained if not a beneficiary of jobs over the next three to five years.”

The firm is building a £370m biologics plant in Ulverston, Cumbria​, while last year it invested £200m​ into manufacturing sites in Hertfordshire and Sussex, plus a further £25m in an API plant in Scotland​.

Furthermore, Witty said yesterday it was worth remembering the company is set to“become bigger by 14,000 people,”​ following a deal in April this year​ where GSK agreed to trade its oncology business for Novartis’ vaccine division.

ViiV

Along with news of restructure, GSK said it was looking to explore the potential for an IPO of its ViiV Healthcare joint venture with Pfizer and Shionogi, formed five years ago to develop treatments for HIV.

“ViiV has been an extraordinary success story and is now establishing itself as an innovative and fast-growing specialty business,”​ Witty said. “This is a business which is right in the middle of what looks like one of the most successful new product launches in the category [Triumeq – approved in August in the US]”

“If ViiV were to be separated from GSK, it would be in the top 40, or perhaps the top third of the FTSE 100.  It would immediately be a very substantial presence and we think that that has the opportunity to create significant value for GSK shareholders.”

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