Sweeping job cuts at GSK to fund £400m Cambridge campus
GSK is poised to slash its back office headcount to help fund a £400m mega-campus in Cambridge, in a move it hopes will bolster its drugs pipeline anFd stave off a looming patent cliff-edge.
In his first major update as chief executive, Luke Miels unveiled plans to find £1.9bn of savings over the next three years in a major strategic overhaul that will see it invest heavily in its late-stage trials as well as its new campus. GSK will also divert some of the savings to help bolster its operating margin, the company said.
Miels said the restructuring would help simplify the business and allow it to focus on its more profitable divisions and bolster its pipeline of new drugs. The pharma giant will lean heavily on technology and artificial intelligence to replace output from the lost headcount. It did not provide the total number of staff whose roles will be affected by the cuts, but job losses are expected to take place across the globe.
As part of the same announcement, GSK also unveiled the new 300,000 square foot site in Cambridge, will become the new home for its research and development arm and host more than 1,000 GSK scientists.
Miels hailed the move, which will see it vacate its Stevenage research and development (R&D) site for Cambridge by 2029, as a shot in the arm for the FTSE 100 giant, which has lagged behind London-listed rival Astrazeneca and US peers in recent years.
“This investment will accelerate our R&D and help us deliver new, competitive products,” he said. “It integrates GSK further into one of the world’s leading centres of knowledge and demonstrates the attractiveness of the UK’s life sciences ecosystem.”
The bumper investment is the latest sign of a patching up of relations between ministers and the UK’s world-leading pharmaceutical industry. At the start of this year, a string of major players including Astrazeneca and German juggernaut Merck axed expansion programmes worth billions of pounds in a spat with the government over the NHS’s pricing regime.
But in February, former science minister Patrick Vallance struck a deal for the taxpayer to fork out an additional £1bn on drug prices, which in turn prompted Astrazeneca to revive plans to plough £300m into the UK economy. The agreement also alleviated pressure on the government from President Donald Trump, who had been threatening to slap enormous tariffs on the pharma exports from the UK and Europe unless the countries started paying more for their drugs.
GSK ramps up phase three trials
GSK’s new campus marks the first major strategic announcement from new boss Miels, who took over from veteran chief executive Emma Walmsley at the start of this year. The FTSE 100 giant had struggled to keep pace with rivals, with shareholders nervous about an impending patent loss on one of its most lucrative drugs.
The patent on GSK’s HIV dolutegravir franchise is poised to expire in 2028, leaving the group facing a hole in its forward earnings. In its eagerly anticipated update on Tuesday, Miels unveiled a major investment drive in late-stage trials, focusing on programmes the group believes will have the most growth potential. The London-listed firm will double its phase-three trials this year from 10 to 20, in a major ramping of its pipeline.
In a bid to help fund the parallel investment programmes, the group has lined up plans for sweeping redundancy programmes in less profitable segments. The job losses are expected to come from back-of-office roles like human resources and shifting staff from general medicine arms to support faster growing parts of the business.
Alongside the restructuring, GSK also said profit in the three months to July fell by 75 per cent after it was hit by unusually high drug-related impairments. Those write-downs included a decision last week to abandon its programme to bring a chronic cough medicine to market, three years after buying the company that owned it for $2bn (£1.5bn).
Total sales rose five per cent to £8.4bn, the company added, while core profit, which strips out developments that the company views to be anomalies, rose seven per cent.
Prime Minister Andy Burnham branded GSK’s Cambridge investment a “step towards more people getting access to new medicines and cutting-edge treatments that will change lives for the better”.
John Healey, Burnham’s new Chancellor, said: “This announcement from GSK is yet another vote of confidence in the sector and demonstrates the success of the government’s industrial strategy in unlocking vital private investment into the UK.”