GlaxoSmithKline is planning a reorganization that will include hundreds of job cuts in the United States, where the drugmaker is struggling to sell respiratory medicines, people familiar with the situation said.
London-based Glaxo will announce a workforce restructuring as soon as this week, said the people, who asked not to be identified discussing a private company matter. The changes will involve operations in the U.S., its biggest market. Deirdre Connelly, president of North American operations, is scheduled to speak to U.S. employees on Wednesday, two people said.
GSK employs 4,500 at its North American headquarters in Research Triangle Park and about 500 at its manufacturing facility in Zebulon. The company makes and packages more than 20 medications here, including Advair and Flovent.
In a statement, GSK spokeswoman Mary Anne Rhyne said the company’s business units are still deciding what changes will be made as a result of the restructuring.
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“The aim of this program is to improve performance by taking unnecessary complexity out of our operations and establish a smaller, more focused, organization, operating at lower costs, that supports our future portfolio,” she said. “Each business unit is currently deciding how to respond to this challenge. When we do have proposals, we will first share those with our employees.”
Glaxo pledged in October to cut costs by 1 billion pounds ($1.57 billion) over three years, with half the savings coming in 2016. U.S. sales are flagging amid increased competition for the company’s best-selling Advair asthma medication. Analysts estimate that sales of the drug will decline 30 percent by 2015, from $5.3 billion last year.
“After stagnating for years, Advair sales have taken a dive and Glaxo lacks growth drivers right now,” Philippe Lanone, an analyst at Natixis Securities in Paris, said in a telephone interview. “It makes sense they would take a hard look at costs.”
The lackluster U.S. performance has put Connelly under pressure. The former Eli Lilly & Co. executive was part of a management reshuffle last month, and now reports to Abbas Hussain, Glaxo’s head of global pharmaceuticals, rather than directly to Chief Executive Officer Andrew Witty.
In October, “GSK announced a new restructuring program to refocus our global pharmaceuticals business and deliver cost savings,” Glaxo said in an emailed statement on Nov. 28. “The aim of this program is to improve performance by taking unnecessary complexity out of our operations and establish a smaller, more focused organization, operating at lower costs, that supports our future portfolio.”
Glaxo told workers last month it would tweak one part of its “patients first” program in the U.S., which was designed to disconnect compensation of sales representatives from prescription numbers, one person said.
While the program remains in place, changes are being brought to the way sales professionals are tested on knowledge of products as part of their evaluation, two people said. Sales representatives continue to be judged on simulations of interactions with doctors and by manager observations of real meetings, one person said.
Connelly unveiled the initiative in 2010, saying the company would no longer link bonuses to sales targets and instead reward sales staff for their scientific knowledge. The changes came as Glaxo grappled with probes into its sales and data disclosure practices. The company eventually paid a $3 billion fine to settle U.S. criminal and civil investigations and signed an agreement with the U.S. government pledging to reform sales and marketing methods.
The drugmaker is hoping a new selection of lung medicines led by Breo and Anoro will help make up for Advair’s shortfall.
GSK’s stock closed Monday at $46.92, up 47 cents. Staff writer David Bracken contributed.