GSK emerges with smaller, more focused NC presence

Advair devices progress down the production line at GlaxoSmithKline's manufacturing facility in Zebulon. GSK executives told analysts recently they are bracing for a generic competitor to Advair, whose U.S. patent expires in 2016.
Advair devices progress down the production line at GlaxoSmithKline's manufacturing facility in Zebulon. GSK executives told analysts recently they are bracing for a generic competitor to Advair, whose U.S. patent expires in 2016.

GlaxoSmithKline, one of the Triangle’s largest employers, is down to about 4,000 employees here after shedding a fifth of its workforce at its North American headquarters in Research Triangle Park.

The elimination of more than 1,000 positions has left one the world’s largest drugmakers with so much vacant office space in RTP that it is trying to lease up to 500,000 square feet for temporary use by state government employees.

GSK executives have publicly vowed their long-term commitment to the RTP site, but the company finds itself struggling to maintain its global dominance in a rapidly changing industry.

“The health care market globally is undergoing unprecedented change,” said Jack Bailey, GSK’s president for pharmaceuticals. “We have sharpened our focus.”

The changes have largely eliminated GSK’s research and development work in RTP, but have left intact its Zebulon manufacturing facility, where about 600 people work.

At the same time, GSK’s integration of a $20 billion asset swap with Novartis Pharmaceuticals has been completed in the United States, sending thousands of former Novartis employees to GSK, most of them to its Philadelphia complex.

Speaking Friday from the RTP campus, Bailey said GSK is facing intense global competition and pressure to hold down prices and to offer affordable drugs. The British drugmaker is also facing a future in which it is developing numerous medicines in a bid to replace revenue from the blockbuster drugs that earlier fueled GSK’s global expansion.

“We have intentionally wanted to move off the blockbuster model because when those blockbuster drugs go off patent, it’s very traumatic,” Bailey said, referring to cheap generic drugs that replace costly name-brand medications when patents expire.

On Thursday, an advisory panel of the U.S. Food and Drug Administration recommended approval of an injectable asthma drug. If approved by the FDA, the new medication would join the four GSK respiratory drugs approved in the past two years.

GSK’s recent staff cuts are a response to increasing pressure from Wall Street, where some had hoped the company would undergo more radical surgery and spin off its surviving three divisions – pharmaceuticals, vaccines and consumer health care – into three stand-alone companies.

“Right now, the company is taking a holistic approach,” said Leyi Wang, a researcher with Leerink Partners in Boston. “The company has a lot of potential but the management has not had a clear strategic vision where they want to take this giant pharmaceutical conglomerate.”

GSK’s stock price has fallen 21 percent in the past year, closing at $42.71 Friday.

The preeminent blockbuster drug GSK is scrambling to replace is Advair, the asthma inhaler made in Zebulon. Global sales of Advair peaked at $8.3 billion in 2013 but slipped to $7 billion last year. Leerink projects that worldwide Advair sales will decline to about $6 billion this year and to about $2.5 billion by 2020.

Analysts are expecting generics to begin competing with Advair after its U.S. patent expires in 2016, but to date no competitor has filed an application with the FDA to manufacture a generic. GSK executives told analysts recently they are also bracing for a generic competitor to Advair, but company CEO Andrew Witty said the likelihood of a generic next year is “vanishingly small.”

GSK is maintaining its 2011 policy of not paying bonuses to sales reps that reward them for the volume of drugs sold to doctors and other providers. Instead, GSK is paying the sales reps based on competency measures. Investors have questioned the benefits of the new approach.

The company is also cleaning up its public image, which has been sullied by several major scandals and significant fines in recent years here and abroad, by ending its practice of paying private doctors to promote GSK drugs to other physicians. The new policy goes into effect next year; last year GSK paid U.S. doctors $5.45 million in speaking fees.

Witty told analysts last month that the company’s future will increasingly be based on selling drugs at higher volumes but lower profits.

“We believe that, going forward, the anxieties and the pressure on this industry will only increase,” Witty said. “The ability of companies to achieve super-high prices for product after product in a small number of markets is limited.”

Murawski: 919-829-8932