GlaxoSmithKline CEO Andrew Witty said the pharmaceutical industry would contract in coming years and that the survivors would be those companies that solved the "equation" of how to squeeze the most profit from every dollar spent on R&D, according to the Philadelphia Inquirer.
"The market is signaling that it wants less—in total—spent on R&D, so the total amount of R&D will come down," Witty said. "That is what it is signaling through pricing and challenges it throws up in front of drug companies to get products to market.”
"Inevitably, you are now seeing, for the first time in history, a reduction in the total amount of industrial R&D done in the pharmaceutical space. But within that, there is clearly space for winners and losers,” continued Witty.
"There is tremendous opportunity for the few companies who solve the R&D equation," Witty said. "It's the companies who deliver multiple new products, not one or two, that address material clinical needs of patients and address the economic needs of the payers—so they are fairly priced.”
"My belief is that five to seven years from today, you'll see a significant number of companies retreat from the pharmaceutical space, one way or another. I think you'll see a few companies solve the problem, and I'm determined that GSK is going to be one of them."
Glaxo reported profits in the second quarter due to better-than-expected cost savings in its restructuring program and in tax changes related to its changing geography. Witty began restructuring the company four years ago, with part of the emphasis on emerging markets. He said 37% of sales were outside the U.S. and Europe, but the company also has facilities in India, China and Singapore.
Despite a 4% drop in revenue, the second-quarter profit was $1.8 billion, compared with a loss of $499 million in the second quarter of 2010.
Witty's restructuring included layoffs in the U.S. sales force. Another piece is moving the 1,300 employees to a new facility under construction. The 15½-year lease is a commitment to the city, but Glaxo also hopes to save money through less unused space.
