The future of GSK

The future?

At the end of last week, GlaxoSmithKline's CEO Andrew Witty announced major job cuts for the company. He has now come forward to explain the details of the plan moving forward, highlighting how the job cuts - most notably within the R&D sector - will impact the future of the group.

According to reports from Friday, Witty outlined his new plan after GSK presented a solid set of financials for the fourth quarter and full-year 2009. Witty highlighted that this year is likely to see continued growth in GSK's consumer business and emerging markets, as well as the introduction of some new products as the "pharma pipeline starts to deliver more and more."

As such, Witty also highlighted how the firm has seen a return to sales growth for the first time since 2007, despite a lagging off-patent market in the US. In fact, GSK has seen its consumer business grow by seven percent in 2009, and Witty pointed to this "incredible performance" that had resulted in the pharmaceutical giant becoming the "fastest growth of any consumer company in the world."

Research

Ultimately though, most shareholders wanted to know what the future plans meant for the R&D sector, given that - much like AstraZeneca's proposal just days before - this is where much of the job cuts will come into force for GSK. In regard to this, Witty said that "if you want a shareholder to give you permission to spend GBP£3-GBP£3.5 billion on R&D, it's only reasonable that there should be some sense of what the return rate might be.

"As an industry [as a whole], over the last 10 or 15 years, the return rates from R&D spend hasn't been very good. That's why many companies have been facing a drought in their pipeline," he added.

"At GSK we're not suffering from that and we have a late-stage pipeline which, if it delivers what we expect it to over the next 10, 15, 20 years of sales, is capable of delivering around an 11 percent rate of return."

Analysts remain confident about GSK, however. Jeremy Batstone-Carr at Charles Stanley told Pharma Times that "we remain of the view that GSK can deliver on its ongoing restructuring programme going forward and that emerging markets will play an even greater role in the generation of stable and sustainable revenue in the future."

Interestingly, British newspaper The Guardian today announced that GSK is one of only five companies that investors remain "heavily dependent" upon - alongside BP, Shell, HSBC and Vodafone -  giving the businesses a massive amount of weight in investment markets.

Related articles

Job cuts for GlaxoSmithKline

Like this article? Get the RSS feed: