GlaxoSmithKline to Slash Jobs in North Carolina

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Reported by Annette Kreuger, Industrial Info Resources (Sugar Land, Texas)--It is a bitter pill to swallow when a city's largest employer begins to lay off employees. That is exactly what is happening in Zebulon, North Carolina, the site of a major drug-production plant owned by British drugmaker GlaxoSmithKline PLC (NYSE:GSK). The action is a continuation of the company's reorganization plans announced last year. It also mirrors what a number of other Big Pharma companies are doing in response to generic competitors, weak pipelines and a tough regulatory climate - slashing jobs to save cash, a subject discussed in greater detail in the new 2008 Pharmaceutical-Biotech Industry Outlook.

Click on the image to see a list of GlaxoSmithKline companies with employee counts by location.

The recent round of job cuts in Zebulon sliced a bit deeper because of the fact that GSK recently invested nearly $90 million for major capital work at the site. Locals had hoped that the expansion that was first announced in 2006, as reported in Industrial Info's Pharmaceutical Tracker, would possibly spare the site. As a result of the layoffs, which in this first round meant the loss of about 70 jobs, GSK had to give up $1.4 million in state-growth incentives. The Zebulon plant, which manufactures and packages products such as Imitrex for headaches and Advair for asthma, is one of the company's largest and currently employs about 1,000. Leading up to the current layoffs, a number of on-site contractors and temporary workers were let go, and recent job vacancies were not filled.

In October 2007, GSK revealed its intent to save up to $1.4 billion in annual costs through job cuts over three years. Part of a major reorganization announced over the past few years, the news of a more ambitious plan last fall was spurred in part by dismal reports on the plummeting sales of its diabetes drug Avandia during the second and third quarters of 2007. A New England Journal of Medicine study released in May 2007 linked the GSK top-seller to an increased risk of heart attack, causing the company to lose an estimated $1 billion in sales revenue from the drug.

The first casualty of GSK's October belt-tightening announcement was the Cidra, Puerto Rico, plant. The site, which produces Avandia and other products, has gone from a peak 900 employees to being targeted for complete closure by early 2009. The plant opened in 1969 as Puerto Rico began to emerge as major hub for pharmaceutical production. Unfortunately, the facility's reputation had been tarnished in recent years by quality-control problems uncovered by FDA inspections in 2004 and 2005 that found that the company had not done enough to address mounting complaints about Paxil CR, used in treating depression. Claims were made by packagers and pharmacists that the tablets were splitting apart before reaching patients. The drug was made in two layers and compressed, with one layer containing the active ingredient and the other inactive. Patients who took a split pill containing an inert ingredient would essentially be missing a dose. And those who took the half containing the active ingredient would be receiving an extra dose. There were also some reports that tablets of different potencies were mixed together by mistake.

Although there is no way of knowing the exact number of jobs that will be lost and which plants may close completely, it is evident that more domestic losses are sure to follow. Another major GSK campus is located in Research Triangle Park, North Carolina, and is home to R&D operations and one of two of the company's domestic headquarters, employing more than 5,000. Employees there are facing the almost certain reality that some of them will soon be leaving the sprawling campus.

As a rule in these cases, it is not the highly educated who have an insurmountable problem finding new employment. Even though they may have to move to another location, their degrees and experience are highly appreciated and sought by the industry. The ones who usually have the most difficult time are the locals who were hired in the plants after high school graduation or with minimal college-level course exposure. Over time, these people undergo continuous on-the-job training, developing specific technical skills targeting exactly what was required. These manufacturing positions pay handsomely in salary and benefits and are hard to duplicate outside of the industry - harder yet when located in more rural areas. The Zebulon plant opened in 1983 and has grown to more than 1 million square feet and represents nearly 40% of the city's $560 million tax base.

Click here for Industrial Info's 2008 Pharmaceutical Industry Outlook.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process and energy related industries with products and services ranging from industry news, forecasting, plant and project databases, as well as multimedia advertising campaign assistance.