Pharma giant GSK announces major restructuring drive to cut £400m in costs
The company said it will invest the cash in research and development.
GlaxoSmithKline has announced a major restructuring programme that will see the company slash £400 million in annual costs in an effort to bolster research spending.
The pharma giant said on Wednesday that the savings would be delivered primarily through “supply chain optimisation” and a cut in administrative costs.
The extra cash will be used to ramp up spending on research and development (R&D) and to support new products.
GSK said it will cost around £1.7 billion over the period to 2021 to implement the programme.
The company has not ruled out job losses but has yet to detail which positions or divisions may be affected.
The move deepens the mark to be left by chief executive Emma Walmsley, who joined the company last year and recently signed off on a 13 billion US dollar (£9.2 billion) deal to buy Novartis’s stake in its consumer healthcare joint venture giving it full ownership of the division.
Ms Walmsley said: “Innovation is the first of our three long-term strategic priorities I set out for GSK last year.
“Improving the performance of our pharmaceuticals business and strengthening our R&D pipeline is fundamental to this.
“Today, we have announced the start of a new approach to R&D which aims to capitalise on the assets we have in our promising early-stage pipeline and build the next wave of growth for GSK.”
The announcement came as GSK announced its second-quarter results, which showed group sales coming in flat at £7.3 billion, at actual exchange rates.
When accounting for the six months to June 30, turnover fell 1% to £14.5 billion.
But stripped of currency fluctuations turnover grew 4% over both periods.
It swung to a pre-tax profit of £614 million up from a loss of £178 million a year earlier in the second quarter, while half-year profits grew 25% to £1.7 billion.
Ms Walmsley said the company had “delivered encouraging results across the company this quarter” and said that sales reflected a focus on drugs including Juluca, single pill for HIV, and its shingles preventative Shingrix.
“With the recent new product launches, development of the new R&D approach and the successful buyout of the consumer business, we have evaluated the group’s cost base and what is required to deliver competitive long-term growth and performance in each of the group’s three businesses. ”
GSK also announced on Wednesday a 300 million US dollar (£228 million) equity investment in genetics testing company 23andMe, as well as a four-year collaboration with the business.
It said it will use 23andMe’s “rich database and proprietary statistical analytics to fuel drug-target discovery”.
“A joint GSK-23andMe drug discovery team will use their combined resources to identify new targets and prioritise based on strength of the biological hypothesis, possibility to find a medicine, and clinical opportunity,” GSK explained.
GSK shares rose more than 1.8% following the news.