Merger job fears

February 6, 1998

Chris Evans, millionaire biotechnology entrepreneur and former academic, has hailed the proposed Pounds 100 billion merger between pharmaceutical giants Glaxo-Wellcome and SmithKline Beecham as "extremely exciting and great news for Britain".

As well as creating the world's biggest pharmaceutical firm, the move will result in a company with a future potential "as exciting and greater than Microsoft", said Dr Evans, who started off as a microbiologist at Imperial College, London.

But the Manufacturing, Science and Finance union fears thousands of science-based jobs among the 21,000 combined UK workforce could be axed. It also fears cutbacks on research and development spend by the merged companies as a result of rationalisation of activities in the area. Both firms have traditionally been strong backers of academic research.

Earlier this week, City watchdog Alastair Defriez, director general of the Takeovers and Mergers Panel, confirmed the City's requirement that trade unions be consulted on the employment consequences before any announcement of jobs cuts associated with corporate mergers.

Roger Lyons, MSF's general secretary, welcomed the ruling. He said the firms were number one and two on the government scoreboard for private sector investment in R&D, accounting for Pounds 2 billion of the Pounds 10 billion total. He said: "This merger could have devastating implications for university research and science graduate employment. Until we get a satisfactory response from the companies, the case for merger has not been made." Mr Lyons has written to Margaret Beckett, president of the Board of Trade, asking her to intervene.

Responding to the developments, a spokesman for Glaxo Wellcome said: "No announcements about job cuts have been made. Rather, both companies have indicated that they are in detailed discussions with a view to merging. While the discussions continue, it is impossible for either company to comment further about many issues including any job cuts. However, communication with all appropriate parties will form an integral part of our plans and we will do so as soon as we can."

But Dr Evans thinks job losses are inevitable: "This is a fact of life when big business mergers and transactions such as this take place. But I do not believe the thousands of people who lose their jobs will be out of work for long."

He does not believe the two firms will cut back on support for academic science. "There is no reason for this mega-monster not to become even more supportive of UK science as the company begins to settle into the number one position."

Biotechnology firms will benefit in a number of ways from the merger, he said. They will, for instance, be able to pick up experienced and useful talent - something always in short supply. He said: "If some of the UK biotechnology minnows deliver on their promises and create therapeutic blockbusters, then the likes of Glaxo Beecham are better poised than most in the healthcare industry to exploit such breakthroughs."

Sir Mark Richmond, former global head of R&D at Glaxo, believes Glaxo-Beecham will regard retaining academic links as important and if there is to be downsizing, he does not think it will happen in R&D. "A big problem for pharmaceutical companies is finding the money for development, which is becoming ever more expensive. This move could help release such funds."

Sir Mark, who was also chairman of the Engineering and Physical Sciences Research Council, said Sir Richard Sykes, chairman of Glaxo Wellcome, "has never made any bones that Glaxo Wellcome wanted to have at least 10 per cent of the world market share, so in a sense the merger is not a surprise. Even so, it still only takes it up to about 8 per cent of the share."

Jeremy Lever QC, a former non-executive director of Wellcome (1983-94), has voiced concern about the impact of the merger on the market for pharmaceutical researchers and drug manufacturing specialists. Mr Lever said: "These workers may not have transferable skills. Employment prospects outside such a dominant employer might be greatly reduced if, for instance, they fall out with it." He wants the European Commission to investigate the matter.

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