SmithKline Selling 2 U.S. Medical Units

LONDON —  Drug giant SmithKline Beecham is selling its U.S. pharmacy-benefits and clinical-lab businesses for nearly $2 billion and plans to cut 3,000 jobs, or 5.2% of its work force, within four years.

SmithKline Beecham Chief Executive Jan Leschly said Tuesday that the sales reflect the company’s desire to focus on its pharmaceutical and consumer health-care businesses.

The company also announced a restructuring that will cost $750 million through 2002 and yield $200 million in annual savings afterward.

The changes will lead to the loss of 3,000 jobs by the end of 2002, most of them in manufacturing operations, the company said. SmithKline currently employs about 58,000 people worldwide.

“We are ending up after these announcements with a stronger company and a more focused company,” Leschly said in London.

The company expects 13% earnings growth this year.

SmithKline, which has its U.S. headquarters in Philadelphia, said that Quest Diagnostics Inc., based in Teterboro, N.J., would buy its Clinical Laboratories business for $1.27 billion. That includes $1.025 billion cash plus a 29.5% stake in Quest worth $245 million.

Clinical Laboratories is based in Collegeville, Pa., and employs 11,400 people in its network. In 1998, the company earned $179 million on net sales of $1.55 billion.

SmithKline is also selling Diversified Pharmaceutical Services, based in Minneapolis, to Express Scripts Inc. for $700 million in cash.

SmithKline Beecham paid $2.3 billion for Diversified Pharmaceutical in 1994. The company said the post-tax loss on the deal was about $713.6 million.

Express Scripts, meanwhile, will be able to compete better with its larger rivals, units of Merck & Co. and Rite Aid Corp., after buying the SmithKline Beecham unit.

Like Merck’s Medco unit and the PCS unit Rite Aid bought last month from Eli Lilly & Co. for $1.5 billion, Express Scripts serves as a middleman between drug makers and health-insurance providers. Express Scripts fills prescriptions by mail, processes almost 300,000 electronic approvals each day for prescriptions filled at U.S. pharmacies, and handles billing.

The SmithKline unit will add more managed-care customers, including some units of Kaiser Permanente, the No. 1 U.S. health maintenance organization. With more customers, Express Scripts may have more clout in negotiating for better prices on drugs.

Express Scripts, based in Maryland Heights, Mo., rose $4.50 to close at $66.44 on Nasdaq.