GlaxoSmithKline

The biggest UK-domiciled pharmaceutical company, GlaxoSmithKline has managed to maintain its industry-leading status in recent years despite relatively few new products.

Andrew Witty has been the company's chief executive since 2007, and has eschewed 'mega mergers' in favour of more external deal making and alliances. One of the most notable examples of this new approach is the creation of ViiV, a new joint venture with Pfizer which merges the companies' HIV portfolios and businesses.

The company saw a 3% rise in sales in 2009 to £28.3 billion, the first time it has had positive sales growth since 2007, with operating profit for the year reaching £8.4 billion.

Pharma’s share of turnover was up 2% to £23.7 billion on the back of pandemic-related products, including H1N1 vaccine products and flu drug Relenza, the latter seeing sales rise from £57 million in 2008 to £720 million in 2009.

There was also growth for GSK’s consumer healthcare business, where turnover rose 7% to £4.6 billion.

But generics remained a threat to the company and during 2009 it lost more than £1.4 billion of sales to cheaper copies in the US market during the year, Witty said, with Avandia sales down 16% to £771 millon.

GSK’s HIV portfolio was also hit hard, but pharma sales in emerging markets grew 20%, representing 10% of group turnover.

Restructuring

GSK has a restructuring programme in place to save around £500 million in the next two years.

These savings would be on top of GSK’s previous restructuring, which is on course to deliver £1.7 billion by next year.

Chief executive Andrew Witty says the company is “continually looking for how we might improve the rate of return” on R&D, and said the cuts reflected that.

GSK will look at reducing fixed costs - essentially bricks and mortar – and at abandoning research areas it feels are less likely to bear fruit.

 GSK has confirmed it will pull out of research in some neuroscience areas, including depression, anxiety and pain.

Meanwhile “fixed buildings” are a “hangover of the creation of the modern R&D industry in the 1980s”, Witty explained in early 2010.

“Today everything is more virtual, more partnership-orientated.”

Despite the proposed changes, Witty said he was “completely confident and positive” about his R&D strategy and pointed to the £1.3 billion of new product sales in GSK’s full-year 2009 results.