June 4, 2015 | By Carly Helfand
Now that it’s teamed up with Novartis’ ($NVS) consumer health unit to form an industry-leading joint venture, GlaxoSmithKline’s ($GSK) OTC business is bigger than ever. But its payroll is about to get smaller, with 350 layoffs hitting the operation.
The Parsippany, NJ-based employees lost their jobs last month, according to a WARN notice filed this week. The cuts hit multiple areas, NJBIZ reports, affecting managers and employees in marketing and medical affairs, sales and operations, finance, information technology, consumer relations and regulatory affairs.
According to Glaxo, the “need to meet established financial and synergy targets and eliminate duplication is critical to the success of the joint venture” and necessitates the headcount reduction, the notice reads, as quoted by NJBIZ.
And for the British drugmaker, whose pharma unit is struggling as aging giant Advair declines at the hands of payers, the success of the joint venture is critical to the success of the company. After trading away its oncology assets to Novartis in March, GSK is relying on traditionally lower-margin OTC and vaccines sales, a move CEO Andrew Witty says will return it to growth if the volume is right.
“We think we’re really aligned with where the river is flowing,” he told CNBC last month. “… We’re going to focus on that, get that volume out there at a fair price, get a good return on our R&D investment, but not be fixated on defending ever and ever higher prices in the developed world.”
That’ll involve consumer health sales growing at a compound annual rate in the mid-single digits between 2016 and 2020, he said–a goal that’s left some shareholders skeptical.
“Putting your faith in over-the-counter goods like toothpaste is a gamble,” one investor told the Financial Times last month.
And if they don’t? Witty himself could be following the departed OTC workers to the door sooner rather than later. “Mr. Witty is running out of time,” Liontrust Asset Management fund manager Stephen Bailey told Bloomberg in May. “He’s either got to deliver in the next 12 months or step aside.”
Meanwhile, the company has been slashing jobs in other areas. Last year GSK announced plans to whittle down its Research Triangle Park, NC-based operations by 900 jobs–a decision affecting chemists, engineers, biologists, clinical development scientists, statisticians and others. And in March, the pharma giant said it would ratchet up that total, shedding 180 sales, managerial, operations, marketing and support staff roles–both in the field and in-house.