GlaxoSmithKline (GSK) is axing 130 'non-core' brands and overhauling its prescription drugs business to focus on products that deliver stronger returns.
It is also stepping up a cost reduction program that has already bitten into media and marketing budgets across the consumer healthcare portfolio.
The British-founded pharmaceutical company, which appointed its first female CEO in March this year, aims to reduce annual costs by £1billion by 2020, which it says will go towards overhauling pharmaceuticals, funding new product launches, R&D investments and reserves to mitigate pricing pressure on margins.
GSK’s procurement team will also look for savings across its supply chain and through ‘strategic supplier relationships’.
The firm, which has a primary listing on the London Stock Exchange and a secondary listing on the New York Stock Exchange, is one of the world's largest pharmaceutical companies. It owns consumer brands such as Sensodyne and Aquafresh toothpaste; Nicabate, Panadol; malted-milk drink Horlicks (more popular overseas), as well as a variety of drugs and vaccines - an area of the business which earned it £21.3 billion in 2013.
GSK CEO Emma Walmsley presented the company's business priorities at a quarterly results investor call last week.
Group sales have been sluggish climbing 4% to £14.7billion in the first half of the year.
“Our priority for the second half of the year is to maintain this momentum and prepare for the successful execution of several important near-term launches in respiratory, vaccines and HIV," she said.
GSK's pharmaceutical division, which makes prescription drugs, grew sales by 4% to £4.4 billion in the second quarter of this year and £8.5 billion in the first half. This is more than double the GSK’s consumer healthcare division, which reported flat sales growth of £1.9 billion and half yearly sales of £3.9 billion.
Sensodyne and Panadol have been star performers within consumer healthcare, growing sales by 5%.
Taking some shine off the results is the rapid decline of top selling respiratory drug Advair, which had a sharp 14% drop in sales to £848million in Q2, with a cheaper generic version of the drug expected to launch in 2020.
The estimated cost to develop a new drug from research lab to patient is about $360 million over 12 years.
GSK said a few prescription products haven't 'delivered full value', leading to a review of the pharmaceutical division and a new focus.
The company will stop 30 pre-clinical and clinical programmes and focus R&D efforts towards new innovations and products in respiratory and HIV/infectious diseases and potential two therapy areas, oncology and immuno-inflammation.
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