GSK guts sales amid Avandia woes
GlaxoSmithKline is eliminating around 1,000 sales positions as part of a plan to save $1.4 billion by 2010 through job and plant cuts.
GSK officials declined to confirm the number, first reported on the Pharmalot blog, but a company source told MM&M it's accurate.
The plan calls for 40% of cuts to come from sales, general and administrative expenses – an area which includes sales and marketing – with another 40% coming from manufacturing and the remainder from R&D. VP, corporate media relations Nancy Pekarek said the firm would be redeploying assets to areas with potential for growth, including oncology, vaccines and biopharmaceuticals. “It's about working smarter,” said Pekarek, adding that positions will be cut across the board. “Every function and every site will be involved,” she said. “There's a beating bureaucracy component to this, as well. Some sites may be affected more than others depending on our business needs.”
The cuts were announced alongside an ugly quarterly earnings report, with US sales down 7% on generic erosion and a steep drop in Avandia scripts due to safety worries. Bright spots included strong sales of vaccines and weight loss drug Alli.
The company's stock slid on the news as analysts revised their estimates. Tim Anderson, global pharmaceuticals analyst for Sanford C. Bernstein & Co., said his firm had lowered its 2008 EPS estimate for GSK to 101.1 pence from 102.5 pence on expectations of "paltry revenue growth" in the lower single digits over the next several years. "However, between a major share buyback and the restructuring plan unveiled today, GSK is able to eke out decent EPS growth over the next several years," said Anderson, who rates the stock a "market perform."