The incentives were part of an agreement with the state that required GSK to invest at least $92 million in the Zebulon plant and create 200 jobs by the end of 2009. On Thursday, a state committee accepted GSK's request to terminate the agreement effective Feb. 23.

The British drug maker, which employs about 6,000 in the Triangle, has notified an undisclosed number of workers at its U.S. headquarters in Research Triangle Park that their jobs will be eliminated. At the Zebulon plant, temporary workers and contractors have been let go and vacancies are not being filled, company spokeswoman Stefanie Mendell said. Layoffs at the plant may follow, Mendell said.

GSK started companywide cutbacks more than three months ago to save as much as $1.4 billion in annual costs over three years. The drug maker has been hurt by generic competition, unexpected regulatory delays and a $1 billion drop in annual sales of its diabetes treatment Avandia.

"We're trying to balance as best we can," Mendell said.

Zebulon is one of GSK's largest production plants. Twenty-three medicines are made or packaged for the U.S. market at the plant. With a work force of about 1,000, it is one of the largest employers in the Wake County town.

Avandia is packaged there. Annual U.S. sales of the blockbuster medicine were down about 40 percent after a study last spring linked it to an increased risk of heart attack.

Demand for four other pills made or packaged in Zebulon is expected to drop this year because of competition from cheaper generics. GSK pushed development of new treatments to replace sales that it expected to lose, but regulatory approval of some of the new drugs has been delayed.

When GSK announced expansion plans for the Zebulon plant in August 2005, it hoped within a year to start production of Treximet, a migraine pill that promised to become a blockbuster seller. But regulatory approval of Treximet has been delayed for more than 18 months.

Zebulon Mayor Bob Matheny said that GSK terminating the state incentive agreement is no reason for doom and gloom.

"They have a very healthy operation here; they're not going to shut this facility down," Matheny said. "They want to play it safe in hard economic times, and I can appreciate that."

GSK made upgrades and bought equipment for the Zebulon plant as planned three years ago, investing more than $100 million, Mendell said.

According to filings with the state, the drug maker created at least 40 of the 200 jobs.

"We're technically in compliance," Mendell said, referring to the state incentives agreement.

But the agreement requires 200 new hires by 2009 and retaining the jobs for 10 years. Mendell said GSK could no longer guarantee that it would fulfill that requirement. "Rather than give the money back later, we just thought it would be better to pull out of the agreement," she said.

Terminating the state agreement does not affect $3.6 million in incentives that Zebulon, Wake County and the state community college system awarded GSK for the upgrade and expansion of the Zebulon plant. So far, the majority of that money has not been distributed.