Healthy Skepticism Library item: 7175

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Publication type: news

Gerlin A.
Glaxo Leads European Drugmakers Higher on Pfizer Cuts
Bloomberg.com 2006 Nov 29
http://www.bloomberg.com/apps/news?pid=20601202&sid=aNG5T8RunPOs&refer=healthcare

Abstract:

Shares of European drugmakers including GlaxoSmithKline Plc and Sanofi-Aventis SA rose as investors bet the companies may follow Pfizer Inc.‘s decision to slash jobs.

Glaxo, Europe’s largest pharmaceutical company, rose 40 pence, or 3 percent, to close at 1,371 pence in London. Sanofi climbed 1.80 euros, or 2.8 percent, to close at 67 euros in Paris. Fifteen of the 16 companies in the Bloomberg Europe Pharmaceutical Index gained.

New York-based Pfizer’s announcement yesterday that it would cut 20 percent of its U.S. sales jobs, or 2,200 positions, may put pressure on European drugmakers to follow suit, analysts said. The pharmaceutical companies are facing increased competition from cheaper generic medicines as patents on their products end. Trimming jobs may help reduce costs and protect earnings, the analysts said.

``Glaxo has the second-biggest sales force in the States,’‘ analyst Alastair Kilgour of Man Securities in London said in a telephone interview. Chief Executive Officer Jean-Pierre ``Garnier has previously been saying he’d like to cut his sales force but he can’t as long as he faces competition from other companies.’‘

Alice Hunt, a spokeswoman for London-based Glaxo, declined to comment about the company’s plans. Glaxo employs almost 100,000 people around the world, including about 9,000 sales people in the U.S.

`Arms Race’

Garnier said last year that he was concerned about the ``arms race’‘ between drugmakers’ marketing budgets and sales forces. Doctors were complaining they were seeing too many sales representatives, he said in a February 2005 interview.

Jean-Marc Podvin, a spokesman for Paris-based Sanofi, declined to comment about the company’s plans.

The rebound in European drugmakers’ shares today ``is a good sign for the industry because, to be honest, there are too many sales people in the States,’‘ analyst Navid Malik of Collins Stewart Holdings Plc in London said in a telephone interview. ``I think it’s positive for the industry.’‘

Firing sales people may not be a remedy for all drugmakers, Sanford C. Bernstein analyst Gbola Amusa said in a telephone interview.

``People think if Pfizer cuts its sales force, everyone else will follow,’‘ Amusa said. ``We’re a bit cautious on this in terms of shareholder value. I think they’ll see something positive in the short-term. The other companies may not follow.’‘