Biotech Values

[DewDiligence]

Glaxo to Cut R&D Jobs

[Layoffs per se in Big Pharma are hardly newsworthy; however, it *is* notable that these layoffs have spread from their original targets in sales and marketing and now include R&D. With each successive R&D layoff, Big Pharma is implicitly saying that it will rely more and more on in-licensing.]

http://online.wsj.com/article/SB122278989273290641.html

›OCTOBER 1, 2008
By JEANNE WHALEN

Drug maker GlaxoSmithKline PLC Tuesday said it plans to cut as many as 850 jobs in research and development in the U.S. and Britain, the latest cuts in an industry grappling with declining profits and productivity.

The cuts, about 6% of total R&D staff, would come on top of the 350 R&D jobs Glaxo said it was eliminating earlier this year, said Claire Brough, a spokeswoman for the Brentford, U.K., company. The exact number of job cuts will be determined after consultations with employees and unions.

The world's second-biggest drug maker by sales after Pfizer Inc. said that the cuts were necessary "to ensure that we can invest in key areas of future growth and evolve our business to compete effectively in what is a rapidly changing and challenging environment for pharmaceutical companies."

The drug industry has been cutting staff and costs in response to declining profits. Pfizer this week disclosed it is abandoning research into heart disease and other areas as part of a restructuring that will involve job cuts. Most big drug companies have announced layoffs over the past few years. [I think the word, “most” can be replaced by “virtually all.”]

R&D staffs have come under particular pressure because they haven't produced enough new products to keep sales growing. Generic-drug competition is eating into profits, and companies haven't launched enough new brand-name medicines to compensate.

As they cut their research staffs, drug companies are pouring investments into biotech companies, which have produced some of the industry's most successful medicines in recent years.

Andrew Witty, who took over as chief executive officer of Glaxo in May, has pledged to increase Glaxo's investment in outside research. He has said that half of Glaxo's drugs in development eventually could come from partnerships with outside firms.

Mr. Witty has been scrutinizing Glaxo's own research team and making changes. Among other moves, he has set up a board that includes outside experts, such as venture capitalists, to review R&D projects and decide which to fund. He has also shut down some areas of research and focused Glaxo on eight disease areas. Glaxo has dedicated teams, known as Centres of Excellence for Drug Discovery, or CEDDs, for each disease area. The changes have caused some upheaval, with at least three CEDD leaders leaving the company in recent months.‹