SHANGHAI – Glaxosmithkline plc, of London, has firmly denied rumors of sizable layoffs in its troubled China operation, reasserting its commitment to the country. While the company is sticking to its story that nobody will be let go, the firm also said in a statement it will continue to "realign resources to build a highly efficient and sustainable business."

Moreover, a company spokesperson told BioWorld Today, the firm has plans to expand, not contract.

"We're not reducing the size of our team. In fact, we will need to hire more people in order to meet the needs of our future business," said the statement.

GSK's business in China was subject to a lengthy government investigation into corrupt sales practices that concluded in the fall. The verdict resulted in the company making a public apology to the Chinese people, the extradition of its UK-born general manager and being slapped with the largest corporate fine in the country's history. (See BioWorld Today, May 16, 2014, Sept. 22, 2014, and Sept. 24, 2014.)

With such headaches, it came as little surprise when rumors started to circulate last week that 1,000 employees would be let go. The initial report came from well-respected Chinese investigative news source, Caixin, quoting six unnamed sources from within GSK saying the exodus would happen over the next two quarters.

Last month, GSK also made a similar move, although much more publicly, announcing that it was laying of 900 people at its Research Triangle Park, N.C. location. That was said to be due to slumping sales in its respiratory care products such as Advair (salmeterol/fluticasone proprionate).

In better times, GSK China rapidly ramped up its sales force with more than 1,000 sales people and was considered to have one of the larger and more aggressive teams. But during the dark days of the corruption scandal, sales reps were often told to stay away by doctors and hospital administrators looking to avoid unwelcome attention.

Asked about layoffs in China during the earnings call on Wednesday, GSK CEO Andrew Witty did acknowledge that "we have seen an attrition of headcount in China obviously through the disruption we had last year."

However, he went on to say that sales revenue had stabilized and was mostly flat in China in 2014 and that GSK will continue to invest in the country.

"Actually, if I think through over the next two or three years, I am quite optimistic about opportunity in China," Witty said. "I think getting stabilization last year was a great first step and we continue to file new products. I personally believe this is going to be an important marketplace for us and we're going to step forward on that basis."

SHIFT IN R&D FOCUS

Before allegations of corruption surfaced, GSK China had also been hit by another scandal in its R&D unit.

In 2007, GSK created a global R&D center in Shanghai focusing on neurodegeneration to find new drugs for diseases such as multiple sclerosis, Parkinson's disease and Alzheimer's disease.

GSK set out to make China a more robust player in its global research efforts and touted a switch from the phrase "made in China" to "discovered in China."

However, that strategic shift hit a snag when a research paper submitted to Nature Medicine in 2010 on multiple sclerosis was later retracted after it was determined that the preclinical research data had been misrepresented. GSK researchers, led by China R&D unit head Jingwu Zang, had submitted the paper.

In June of 2013, GSK dismissed Zang, an expert in the neurodegenerative field, and put three of the other researchers on administrative leave.

Now a source close to the company told BioWorld Today that GSK has announced a new strategic priority for the research team and will be laying off existing researchers as well as hiring new ones.

The Neuroinflammation Discovery Performance Unit (DPU) in China and Singapore will be closed. About 40 people in China, and 80 people overall, were reportedly served pink slips. Following China's Labor Law, which has specific rules regarding severance packages, staff will be given a month's salary for every year of service, plus an additional three months salary.

Employees were informed in December about the layoffs expected to be complete by March 2015, said the source.

A new DPU with a focus on neuroexcitation will be established, creating 30 positions.