GlaxoSmithKline ($GSK) CFO Simon Dingemans came to pharma from Goldman Sachs, and he brought a set of financial to-do's along with him. In a Q&A with Investor's Business Daily, Dingemans talked about that financial strategy--but also about some against-the-grain changes in manufacturing.
Just as Novartis ($NVS) CEO Joe Jimenez (photo) is applying rules he learned at Heinz, Dingemans is focusing GSK on some new financial metrics. And with pharma growth focused in low-margin emerging markets, Dingemans is looking to counter the "topline pressure" with lessons learned at GSK's consumer businesses.
Meanwhile, as much of the drug industry continues to farm out manufacturing to cut costs, GSK is "insourcing" to make its production and supply chain more efficient. After a quote-unquote restructuring program that involved shutting down and consolidating some facilities, the company is apportioning its manufacturing network into its three businesses (pharma, vaccines, and consumer products), and then, within pharma, to emerging markets on the one hand and developed markets on the other. "So we're much closer to the price point and regulatory requirements of those different markets," Dingemans told IBD.
Now, GSK is looking to pare down its stable of external manufacturing partners--it now has several thousand--and to bring a chunk of that production back in-house. "It is contrary to where a number of our competitors have gone," Dingemans says. "But it's allowed us to reduce our costs materially, it's improved the supply chain, it's improved reliability allowing us to take working capital out of the system, and we're not paying someone else's margin at the end of the day."
- read the IBD piece