Recruiting in China

GlaxoSmithKline is poised to announce cuts of more than 3,000 jobs this week at its European and US operations as the focus shifts from stagnant Western markets to China, emerging Asia, and Latin America.

By Ambrose Evans-Pritchard
Published: 6:51PM GMT 31 Jan 2010

The retrenchment follows last week's move by AstraZeneca to slash 8,000 jobs in a five-year restructuring plan, on top of 12,600 cuts already made. The lay-offs at the UK's two largest drugs groups are a blow to one of the last surviving fortresses of British industry, responsible for a quarter of the world's top 100 medicines.

The cuts are a sign that the old strategy of relying on patents and selling "white pills to Western markets" has passed its time as generic drugs sweep global markets.

Glaxo aims to reduce £1.7bn in annual costs by the end of next year and re-focus efforts on research and development. The company has seen lower demand than expected for its Pandremix vaccine against H1N1 swine flu as the virus proved less deadly and contagious than feared at first, though it may yet come back to bite in a mutated form, as the similar Spanish flu virus did in 1919.
The vaccine has lifted sales by around £835m over the last three months but it has not proved a bonanza.

Sales of Glaxo's H1N1 drug Relenza have also fallen short as swine flu fears subside. Germany alone cut its order of Relenza by 30pc earlier this month, costing the company almost £120m in lost sales. France plans to cancel half its expected orders. Britain, Holland, Spain, and Belgium have all been in talks over reductions. In the end, many patients who did come down with the disease needed just one pill instead of two.

Analysts say the group is likely to announce a return to profit growth of around 12pc to £8.69bn at its full-year results on Thursday after an 11pc slip the year before.

The company has been hit by generic versions of its herpes treatment Valtrext after the recent expiry of its US patent, although it has the lupus drug Benlysta wating in the wings. Valtrex sales are expected to drop by two thirds this year to $782m, raising concerns that the group is too reliant on aging patents.

Andrew Witty, the chief executive, is trying to diversify away from its core pharmaceutical business in the West to consumer health, especially in China.

Tougher rules have made it harder to make money in Europe and America. The EU has passed swingeing codes that have pushed key research activities abroad.

The share of the world's clinical trials conducted in the UK fell from 6pc to 2pc between 2000 and 2006, largely due to intrusive regulations that have sharply raised costs.