That's just not going to cut it -- the dollar can't keep getting stronger forever. Glaxo didn't say how many jobs would be cut, but some level seems inevitable. The company is hoping to save about $2.5 billion per year, up from a previous goal of around $1 billion per year.
The problem is that Glaxo continues to have issues with patent expirations and new drugs can't make up for the lost sales. For instance, Glaxo's human papillomavirus (HPV) vaccine, Cervarix, logged just $231 million in sales last year since it's not approved for use in the U.S. yet and has to compete with Merck's
Glaxo has done a good job of cutting costs where it can so far, so I suspect it'll be able to continue the trend with its new initiative. For instance, the company went from spending 35% of its revenue on selling, general, & administrative costs in 2001 to just 27.7% last year. That's savings that gets pushed right down to the bottom line.
The company has also decided to stop giving guidance for investors. I'm all for companies not giving guidance -- neither Schering-Plough
Glaxo can't cut costs forever, but hopefully it shouldn't have to. The drugmaker has a well-stocked pipeline -- much of which it established through partnerships -- which should be able to boost earnings in the future. In the meantime, investors get to collect a healthy dividend check -- which hopefully won't get cut -- yielding around 5% while they wait for things to turn around.
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