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GSK restructuring to save £1.7bn

Speculation that GlaxoSmithKline could be announcing 10,000 job cuts remained unconfirmed when the company released its fourth quarter results for 2008 on February 5

Speculation that GlaxoSmithKline (GSK) could be announcing 10,000 job cuts remained unconfirmed when the company released its fourth quarter results for 2008 on February 5. However, it announced that the ongoing restructuring programme was set to expand, with the aim of realising pre-tax annual savings of £1.7bn by 2011.

Although GSK's chief executive officer, Andrew Witty, did not quote actual numbers for job reductions in the report, he did say that 2008 had been a turning point for the company, which was "now in a pivotal period of change". He said the extension of restructuring was a "vital catalyst" to radically change GSK's business model and savings from it would be used to support the priorities of growing a diversified global business, delivering more products of value and simplifying operations.

He continued, "In 2009, savings from restructuring will mitigate the decline we expect to our gross margin due to product mix changes with a higher percentage of sales generated from vaccines, consumer healthcare and emerging markets".

"We are very conscious of the effect this programme will inevitably have on our employees and if options exist where we can achieve our financial goals and preserve jobs we will do everything we can to do so."

In line with the company's focus on developing growth in emerging markets, GSK are in the process of purchasing UCB SA's marketed product portfolio across certain territories in Africa, the Middle East, Asia Pacific and Latin America for a cash consideration of £483m. As a result of the agreement, GSK will acquire several pharma brands, including Keppra for the treatment of epilepsy and Xytal and Zyrtec for allergic rhinitis. The deal is expected to be complete by the end of March. It will add to GSK's other recent emerging market deals, including the agreement with South African pharma company Aspen, the acquisition of the Egyptian mature products business of Bristol Myers Squibb (BMS) and BMS Pakistan, all of which took place in 2008.

6th February 2009

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