Brace Yourself: GlaxoSmithKline's New CEO Gets Ready to Overhaul the Drug Pipeline

Published: Jul 25, 2017

Brace Yourself: GlaxoSmithKline's New CEO Gets Ready to Overhaul the Drug Pipeline July 24, 2017
By Mark Terry, Breaking News Staff

When Emma Walmsley took over London’s GlaxoSmithKline in April, replacing Sir Andrew Witty as chief executive officer, some of the concerns expressed by investors was whether her background as head of L’Oreal would have her ignoring GSK’s pharmaceuticals. However, as she is prepared to speak to the company’s 100,000-plus worldwide workforce on July 26, that does not seem likely, as recent decisions have made clear.

GSK is selling off the UK part of its Horlicks malted milk beverage company. Sales have dwindled in the UK, although the bedtime drink remains popular in India. It also plans to sell off its MaxiNutrition sports drink brand. In addition, as part of its restructuring, GSK has halted plans for a biopharmaceutical manufacturing facility in Cumbria, UK, which was expected to cost 350 million pounds. It says it no longer needs the manufacturing capacity. It is also considering selling its antibiotics business located at Ulverston, UK. The facility makes antibiotics such as Zinnat, Zinacef, and Fortum.

Reuters notes, “Despite her non-pharmaceutical background in Consumer brands, Emma Walmsley sees improving drug research productivity as her top priority, and she wants Britain’s biggest drugmaker to have fewer but potentially more lucrative new medicines launches in future.”

This is likely to mean cutting or licensing out some of its experimental drugs, probably in non-core area, while increasing investment in the most promising areas. It may involve early-stage acquisitions, as well.

The company is a leader in vaccines and consumer health, but has been weaker in prescription drugs and has been noticeably lacking in blockbuster launches in recent years. Company insiders tell Reuters that they expect Walmsley to sharpen its drug pipeline, which euphemistically is dubbed as “diverse,” when it perhaps means “unfocused.” The company is very strong in respiratory and HIV. “But,” Reuters writes, “it lags in others such as cardiovascular, rare diseases and diabetes, and some investors worry it has been spreading its R&D budget too thinly.”

And it notes weak launches of new drugs, citing the company’s disappointing launch of Tanzeum for type 2 diabetes, and Benlysta for lupus.

“It’s a company which has struggled to do what you would hope a pharmaceutical company would do, which is do the R&D and successfully get the products through,” Tim Rees, a fund manager with Insight Investment, told Reuters.

In May, GSK took a hit when one of its largest investors, Neil Woodford, of UK’s Woodford Investment Management, sold off his shares of GSK. In a blog post titled “GLAXIT,” Woodford noted he had investment in GSK for 15 years and “consistently believed that GlaxoSmithKline was capable of delivering growth and realizing shareholder value. Neither has been forthcoming to the extent that I had hoped and expected.”

Woodford had been urging GSK to split since 2015, arguing that the company didn’t do a good job of managing all the different constituent parts. In particular, he aimed at the pharmaceutical division, writing, “The consumer healthcare division has delivered modest progress but its growth rate and margins have been well below that of its peers; Vaccines has performed well at times but growth has faltered in recent years; the one genuinely successful area has been the development of its HIV franchise, ViiV.”

The Financial Times, however, notes “The company’s last set of results in April showed sales growth of almost 20 percent, exceeding analysts’ expectations, with each division comfortably in positive territory. Pharmaceuticals, for example, notched up sales of 4.2 billion pounds, a year on year growth rate of four percent when adjusted for currency movements.”

Back to news