GlaxoSmithKline ($GSK) is making big cost cuts to boost its finances next year as sales of its $8.25 billion asthma med Advair are deflated by competition, generic and otherwise. With the U.S. being the biggest market for the drug, where do you think it will look to make cuts? Yes, reports are that hundreds of jobs are on the line in the U.S. and the culling will be announced this week.
|GSK CEO Andrew Witty|
CEO Andrew Witty said cuts would have to be made to reduce costs by £1 billion (about $1.6 billion) over the next 3 years when the company reported disappointing Q3 revenues in October. The company said that headcount reductions would be announced after the company had meetings with employees, and sources are telling Bloomberg the big reveal will be made this week by Deirdre Connelly, president of North American operations. She has a meeting set Wednesday to talk with U.S. employees.
The why of the matter is clear. Advair is GSK's biggest seller and analysts are pegging sales of the asthma drug to be off 30% next year, Bloomberg reports. Advair is already off patent but has held its own since its inhaler device is hard to copy. Competition from Teva Pharmaceutical Industries ($TEVA) and Novartis' ($NVS) Sandoz unit are taking market share in Europe while in the U.S. AstraZeneca ($AZN) has been making progress with its own respiratory drug Symbicort. Express Scripts ($ESRX) this year made things worse when it gave Symbicort a place in its exclusionary formulary this year while dropping Advair. GSK acknowledged in its Q3 report that it expected sales to continue to slide "in line with recent trends."
It is not as if cutting jobs and costs is new at GSK. The current reduction plan comes on top of a £1 billion reduction program announced early in 2013. Those reductions were mainly to come from manufacturing and R&D, with job cuts targeted in Europe.
Witty has assured investors that respiratory drug sales will return to growth in 2016 as the company rolls out new meds. Anoro and Breo are on the market, and GSK has some other new respiratory drugs it expects to be approved soon.
- read the Bloomberg story
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