[June 11, 2008]

Scientists at GSK expect layoffs: The drug maker says its workers at RTP should get the news this week

(News & Observer, The (Raleigh, NC) (KRT) Via Acquire Media NewsEdge) Jun. 11--Hundreds of highly paid GlaxoSmithKline scientists will find out today whether they still have jobs as the drug maker steps up a restructuring program it announced in October to counter slow sales.

A GSK spokeswoman acknowledged the job cuts but declined to provide details, except to say that employees will be notified this week and receive severance packages.

"There is a whole lot of reshuffling going on companywide," said Melinda Stubbee. "Unfortunately, as part of that process, jobs are going to be lost."

The layoffs have been in the works for weeks, said Stephen Frye, GSK's former head of drug discovery, who joined the UNC-Chapel Hill faculty last year. Frye said he has been talking to several former colleagues who were worried about losing their jobs.

GSK plans to eliminate half of about 500 jobs at its two research and development centers in Philadelphia and RTP, Frye said his former colleagues told him. The centers are involved in finding treatments for cardiovascular and metabolic diseases, including diabetes. Stubbee would not confirm that information. GSK now employs 4,700 in RTP.

Managers overseeing research projects expected to learn Tuesday whether they would be laid off, Frye said. Staff scientists await word today.

GSK's restructuring has been fueled by rising competition from generic drugs, heightened regulatory scrutiny and about $2.5 billion in lost sales of Avandia -- a best-selling diabetes pill until a study published in May 2007 linked it to an increased risk of heart attack. The drug maker is also facing patent expirations of drugs that are likely to generate $4.6 billion in annual sales this year.

Analyst Steve Scala with Cowen, a New York investment bank, in a research note published Tuesday reduced his forecast for GSK sales for each of the next three years.

Like other large pharmaceutical companies that have shed thousands of jobs in sales and research in the past year, GSK is trying to get leaner and more efficient.

In February, the British drug maker cut an undisclosed number of jobs at its U.S. headquarters in RTP. Three months later, the company laid off 70 employees at its manufacturing plant in Zebulon.

At the same time, GSK is shifting research and development activities to lower-cost countries, including China, and partnering with smaller biotech companies to come up with new drugs.

The shift doesn't mean GSK is cutting research programs, Stubbee said.

"Big pharma players can no longer hope to generate the absolutely best science in all areas on their own," Jean-Pierre Garnier, GSK's former chief executive, wrote in the Harvard Business Review last month. "Therefore, standard operating procedure should be to decide on a scientific bet, shop around among all the external players that are pursuing such research, and establish a contractual relationship with the best."

The restructuring program, which aims to save as much as $1.4 billion annually over three years, was initiated on Garnier's watch. Garnier retired last month and has been replaced by Andrew Witty, who pledged to boost GSK's investment in new drugs discovered outside the company.

To determine whom to lay off, GSK asks all employees in targeted areas to interview for the remaining positions, Frye said. That means the GSK employees who lose their jobs this week have gone through the interview process twice in the past year.

Many are disillusioned with the company they once thought was a good place to be, Frye said. Recently, he said, "people say GSK is a good place to be from."

sabine.vollmer@newsobserver.com or (919) 829-8992

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