GSK to offlaod non-core brands in cost-cutting programme
Pharma giant GlaxoSmithKline (GSK) says it will offload more than 130 of its non-core brands as it extends a major cost cutting programme that saw it announce 320 job cuts last week.
It is one of the first major moves by GSK under new chief executive Emma Walmsley, and is meant to help deliver an additional £1 billion in annual cost savings by 2020.
"A key driver of the new savings will be through realising efficiency improvements in the Group's supply chain", GSK said.
"This will include changes to GSK's manufacturing network, divestment and exit of more than 130 non-core tail brands (£500 million in annual sales), reductions in overheads, improved procurement savings and more strategic supplier relationships."
The company also said it would be terminating select development programmes which are "unlikely to generate sufficient returns" and had so far taken the decision to cut more than 30 pre-clinical and clinical programmes - including those involved in treatments of hepatitis C, psoriasis, rheumatoid arthritis, and solid tumours.
"The Group has also undertaken a strategic review of its rare diseases unit and is now considering options for future ownership of these assets," the company said.
GSK added that savings from its raft of divestments are earmarked for funding new product launches, research and development, and for offseting price pressures
The pharma firm last week outlined plans sell off its malt drink Horlicks brand in the UK and close the associated manufacturing site in Slough, while outsourcing some of the antibiotics manufacturing activity at its plant in Worthing.
It also backtracked on plans to invest in a biopharma facility in Ulverston, Cumbria, saying it "no longer needs the additional capacity", adding that a strategic review of its cephalosporin antibiotics division could result in a sale of the business and its related manufacturing plants.
Last week's proposals are expected to result in 320 permanent GSK staff losing their jobs over the next four years.
GSK announced the additional cuts as part of its second quarter results, which showed a 12% rise in revenue to £7.3 billion.
However, when stripped of currency effects including the weak pound, turnover grew just 3%.
The company also managed to shave down its pre-tax loss to £178 million compared to £318 million reported for the same period last year.
However, GSK has cut its full-year guidance for earnings per share (EPS) by around two percentage points due to costs linked to the launch of a new HIV drug treatment.
It now forecasts adjusted EPS growth of between 3% and 5% on a constant currency basis.
Ms Walmsley cheered the results, saying it was "another quarter of progress for GSK".
"Our priority for the second half of the year is to maintain this momentum and prepare for the successful execution of several important near-term launches in respiratory, vaccines and HIV," she added.