GlaxoSmithKline has announced plans to cut costs in its struggling European drugs division and has promised investors a return in growth this year, after failing to deliver projected sales and margin recovery in 2012. After putting a number of major drug patent losses behind it, GSK had originally banked on pulling out of its slump in 2012. However, sales were held back by larger than expected drug price cuts in austerity-hit Europe.
GSK, Britain’s biggest drug maker has said that restructuring its European operations will amount to annual cost savings of at least £1 billion ($1.6 billion) until 2016.
The firm has also placed its Lucozade and Ribena drinks brands under strategic review – a process that could see the products repositioned, partnered with another company or sold off.
Andrew Witty, CEO told reporters that he is hoping for growth in the year ahead. “2013 should be the first in a series of growth years for GSK,” he said.
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Europe has been a weak point for many drug makers but GSK's portfolio has been particularly hard hit by government budget cuts. As a result, Witty said he was taking action to “reduce costs, improve efficiencies and reallocate resources.”
The restructuring process in Europe will involve some job cuts but he declined to go into details.
New Products Pitched To Boost Profitability
The pharma giant is also relying on a number of new drugs to turn around its ailing fortunes in the mid-term, starting with six products that have already been submitted for approval in lung disease, melanoma, diabetes and HIV/AIDS.
Keenly awaited final-stage Phase III clinical trial results are also due for two high-risk, high-reward projects in heart disease and cancer, according to reports.
2013 is going to be a crucial year for GSK's pipeline, although the main impact on the sales line will be felt during 2014 and beyond - assuming the new medicines live up to expectations.