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GlaxoSmithKline threatens to move investment out of U.K. in tax debate

Andrew Witty

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RESEARCH TRIANGLE PARK, N.C. – Andrew Witty, chief executive officer at GlaxoSmithKline (NYSE: GSK) is threatening to move hundreds of millions of dollars in future investment out of the United Kingdom in a debate about U.K. tax policy.

Witty reacted to a proposal for a so-called “patent box” that offers tax breaks on profits from new drugs beginning in 2013.

“The patent box is exactly the sort of active, long-term and creative support that we need from the Government to ensure that the UK remains an attractive place for highly skilled sectors such as pharmaceuticals,” Witty said in a statement.

“For GSK, assuming the new regime will apply to patents currently under development it will have the immediate impact of making the UK a priority area for future investments, particularly in manufacturing,” he added.

As Andrew Jack of The Financial Times reported Friday, GSK is planning $810 million in funding for development and manufacturing of new drugs with $324 million committed to the U.K. However, location for a $486 million is still undecided.

GSK operates its U.S. headquarters in RTP and employs more than 4,000 people in the area.

The complete GSK statement:

“GlaxoSmithKline (GSK) welcomes the introduction of a new measure – the ‘patent box’ – announced in the Pre-Budget Report to stimulate future investment in the UK.

"The ‘patent box’ will work by applying a reduced rate of Corporation Tax of 10% to income from patents from April 2013. GSK believes this new system will significantly improve the UK’s international competitiveness and encourage long-term inward investment in the UK from companies seeking to build their future high technologies and manufacturing capability.

“Andrew Witty, CEO of GlaxoSmithKline said, “The patent box is exactly the sort of active, long-term and creative support that we need from the Government to ensure that the UK remains an attractive place for highly skilled sectors such as pharmaceuticals. For GSK, assuming the new regime will apply to patents currently under development it will have the immediate impact of making the UK a priority area for future investments, particularly in manufacturing.”

“The introduction of the patent box will enable GSK to increase its existing investment in the UK. Near-term likely investments include building a state-of-the-art biopharmaceutical manufacturing plant in the UK. Biopharmaceuticals are medicines that are made from biotechnology (biological systems or living organisms which are modified for medical purposes). GSK currently has six biopharmaceuticals in late-stage development for treatment of diseases such as lupus and diabetes, representing 15% of GSK’s clinical pipeline.

“The company is also committing new investment to its facility at Ware, Hertfordshire, to manufacture next generation respiratory medicines. GSK has significant heritage in this area and has a leading pipeline of new treatments for asthma and COPD.

“In combination, these new investments in UK manufacturing will amount to approximately £500 million and will result in new jobs in UK manufacturing. The introduction of the ‘patent box’ will also benefit small businesses who supply services and facilities to sectors specialising in research and development. For example, GSK works with more than 20,000 suppliers in the UK.”

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