GSK to hack jobs in Europe where austerity has taken toll

Sir Andrew Witty

European austerity is taking on a very personal meaning at GlaxoSmithKline ($GSK). CEO Sir Andrew Witty says more cost-cutting is coming, and the brunt of it will fall on workers and operations in Europe where restrained government spending nicked GSK's revenue 7% last year.

"Given the sustained shift we have witnessed in the European reimbursement and pricing environment, we plan to initiate further restructuring of our European pharmaceuticals business to reduce costs, improve efficiencies and reallocate resources to support identified growth opportunities in these markets," Witty said today. That is business-speak for workers are going to lose jobs.

While the CEO didn't offer up details, he said he expected cost-cutting to produce at least £1 billion ($1.6 billion) in savings annually by 2016. He also said GSK will make changes in manufacturing and R&D, expecting to shorten how much time it takes to get drugs to market, and to squeeze inventory levels in the supply chain. Earnings, when special expenses were factored out, were actually up 1% to £2.3 billion ($3.6 billion) for the quarter.

For this year, the company is betting on the income, both from drugs it expects to get approved and from stronger sales from emerging markets. Revenue from emerging markets last year was up 10% and made up a quarter of new revenue growth for the company. Consumer sales were up 5%. This week GSK said it was paying $900 million to expand its operation in India. That helped offset issues elsewhere, including in the U.S., where drug and vaccine sales fell 2%. Witty tried to pretty up that picture by pointing out that in 2011 sales in the U.S. had fallen 5%. Sales in Japan were down 6%. 

Sounding a bit like a broken record, the CEO said investors can expect revenue growth of about 1% this year and earnings per share up 3% to 4%. That kind of growth had at one time been projected for last year.

- read the release