Job cuts for GlaxoSmithKline

The threat of pharmamerging markets got another boost yesterday after it was revealed that drug-maker GlaxoSmithKline (GSK) is expected to announce thousands of job losses alongside its annual results this week.

The UK-based pharmaceutical giant is reportedly likely to follow in the footsteps of other drug companies, including key rival AstraZeneca - who announced similar cuts at the end of last week - by announcing cuts at the end of this week.

According to a report in yesterday's British newspaper The Guardian, GSK Chief Executive Andrew Witty is now finalising plans that will see the company "switch focus" and concentrate on fast-growing emerging markets, including China.

Patent protection

Like many Big Pharma companies, GSK is facing the harsh reality that several of its blockbuster drugs are either about to lose - or have already lost - their patent protection in western countries, and - as US and European governments continue to bear down on medical costs - Witty, like many of his peers, believes the best prospects for growth lie elsewhere.

Its not a new train of thought either. In fact, GSK's emerging markets business has reportedly been expanding at close to 20 percent a year for the last two years, and reports from the end of 2009 suggest that as many as seven emerging nations - Brazil, Russia, India, China, Korea, Mexico and Turkey - could soon account for 70 percent of total pharma growth.

As such, yesterday's announcement is likely to continue the push by GSK to reduce the workforce in the US and Europe, while continuing to expand in Asia.

And who can blame Witty? The pharmaceutical industry at large has long been battling against the tide as it tries to source alternative ways to generate the lost revenue that will inevitably come from patent expiries. And GSK - who in early 2009 moved to broaden its product range by agreeing a US$3.6 billion deal to buy skincare specialist Stiefel Laboratories - have long been thinking that diversifying the company's portfolio away from conventional blockbuster drugs is the answer to future growth.

Profits

Nonetheless, the job cut issue for GSK remains multi-faceted. First is the well publicised issue that the firm has seen huge profits as a result of the swine flu pandemic, as governments stocked up on the company's vaccine Pandemix, and the drug Relenze, which helps relieve the symptoms of the disease.

However, that factor, coupled with the grave reality that key rival AstraZeneca will shed as many as 8000 staff, is likely raise fears about the future for the pharmaceuticals sector - historically an area of strength for British business.

Currently, GSK employs 99,000 people in more than 100 countries, but already, in 2007, the firm had announced a major restructuring plan that was aimed at reducing its costs by GBP£1.7 billion a year.

It seems then that, as cost-cutting takes priority alongside emerging market growth, like AstraZeneca, job losses for GSK are nothing short of inevitable.

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