GlaxoSmithKline plc. (ADR)(NYSE:GSK) plans to ditch more than 30 drug development projects as part of a restructuring plan spearheaded by chief executive officer, Emma Walmsley. The executive has also announced plans to offload more than 130 non-core brands as part of an effort that seeks to enhance focus on core pharmaceutical business.
GlaxoSmithKline Upcoming Cuts
Proposed changes will also see 13 clinical and 20 preclinical programs stopped or divested as part of the ongoing review. Walmsley plans to allocate up to 80% of GlaxoSmithKline’s R&D budget on respiratory and HIV/infectious diseases.
GlaxoSmithKline has also made known its intention to stop the sale of diabetes struggling drug Tanzeum. There are also plans to end collaborations with Johnson & Johnson (NYSE:JNJ) on experimental rheumatoid drug sirukumab.
Walmsley has defended the proposed cuts reiterating that they will not in any way result in a lower research and development budget. However, the executive expects the upcoming changes to help the company save up to £1 billion in costs by 2020. The cuts comes barely weeks after the company announced plans to lay off up to 320 personal as part of a cost saving drive.
A key driver of the new savings will be through realizing efficiency improvements in the Group’s supply chain,” GSK in a statement.
Britain’s biggest drug maker plans to use savings from the raft of divestments to fund new product launches in addition to financing key core research and development projects. The pharmaceutical giant has already outlined plans to sell its malt drink brand Horlicks having also canceled plans to invest in a biopharmaceutical facility in Cumbria.
The restructuring comes as a surprise given that GlaxoSmithKline is fresh from posting a 12% increase in sales that came in at $7.26 billion in Q2. Earnings in the quarter were also up by 12% to 27.2 pence, compared to analysts’ estimates of 26.2 pence. The drug maker pretax loss in the quarter dropped to £178 million from £318 million. The Company expects its earnings per share for the full year to grow by between 3% and 5%.
GlaxoSmithKline was down by 2.65% in Wednesday’s trading session to end the day at $40.85 a share,