Avandia sales drop hurting GlaxoSmithKline

A UK newspaper reported yesterday that drug giant GlaxoSmithKline (GSK) – the second largest pharmaceutical company in the world – will cut 150 or more scientists and support staff positions.

For years, GlaxoSmithKline, the manufacturer of Avandia, enjoyed stellar sales of the diabetes drug. Avandia was GSK’s second-best seller until the results of some studies surfaced that indicated the drug poses serious risks for its users.

In February of 2007, a press release issues by GSK announced a link between female users and increased risk of bone fractures, especially of the upper arms, hands, and feet.

In June of last year, an article in The New England Journal of Medicine reported that Avandia significantly increased the likelihood of heart attacks by 43% and death by cardiovascular diseases by as much as 64% in users.

The news dealt a devastating blow to Avandia. Estimates indicate that annual Avandia profits dropped by a billion pounds (nearly $1.8 billion U.S.). A growing number of lawsuits against GSK and competition from cheaper generics also threaten GSK’s numbers. It could be argued that while additional job cuts save the company some money, those cuts are only necessary to make the company’s numbers more attractive to investors.

According to the Hertfordshire Mercury, a GSK spokeswoman explained the cuts as “part of GSK’s longer-term strategy to ensure that we invest in key areas of future growth and evolve our business to compete effectively in what is a rapidly changing and challenging environment for pharmaceutical companies.”

Translated from CEO-speak, the statement seemingly alludes to all the problems pharmaceutical companies face these days — that they must appear extra-profitable to investors while sustaining aggressive ad campaigns amidst litigation and declining sales.