New GlaxoSmithKline CEO Wants to Dump Another Business as it Prioritizes Pharma

New GlaxoSmithKline CEO Wants to Dump Another Business as it Prioritizes Pharma July 19, 2017
By Mark Terry, Breaking News Staff

London-based GlaxoSmithKline ’s new chief executive officer, Emma Walmsley, is conducting a strategic review of the company and selling off some of its units.

Top of the list is the sale of the UK business part of Horlicks. Horlicks is a malted milk drink that is marketed as a before-bedtime drink. Sales have faded in the UK, but remains popular in India, where it plans to continue selling the beverage.

Along the same lines, the company is considering selling its MaxiNutrition sports nutrition brand. UK sales of Horlicks and MaxiNutrition are approximately 30 million pounds per year.

Walmsley, when she took over from Sir Andrew Witty in April, indicated she wanted to focus on the company’s drug business. This was something of a concern to investors, because her background was in the company’s L’Oreal cosmetics business. She said at the time, “I want to make that [pharmaceuticals] more at the heart of where we spend our leadership time and what we spend our time talking about.”

The pharmaceutical division made up 16.1 billion pounds of the company’s 27.8 billion pounds of annual sales in 2016.

In May, GSK’s top investor, Neil Woodford, of UK’s Woodford Investment Management, cashed out his company’s shares of GSK. In a blog post titled “GLAXIT,” Woodford stated that he had invested 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.”

For the last two years, Woodford had been urging GSK to split. In October 2015, he met with Sir Philip Hampton, GSK’s board chairman, urging him to break it up. And in January 2016, he went on Radio 5 live’s Wake up to Money broadcast, pushing for the same thing.

In his blog post, Woodford said, “For example, if future success pivoted on the richness of the pharma pipeline, it would have to pay a lot more attention to that pipeline. Instead, the growth delivered by other parts of the business have been seen as a hedge against the underperforming pharma division—management has never had to live or die by the pharmaceutical sword and as a result, that part of the business has not received enough attention.”

Which apparently is what Walmsley is trying to do. Although seemingly in contradiction to a focus on pharmaceuticals, Walmsley is also considering unloading its cephalosporins antibiotics business. Under review are the brands Zinnat/Ceftin, Zinacef and Fortum. Their global annual sales are around $260 million, but are facing competition from inexpensive generics. However, it will still manufacture other antibiotics, including Augmentin, and will continue research and development into new antibiotics for emerging infections and antibiotic-resistant infections. However, the sale would allow it to eliminate some manufacturing facilities.

The company also announced 300 job losses today. The cuts were at factories at Worthing, and in Slouth, where Horlicks is manufactured. That will create 320 job losses over the next four years.

The company employs about 17,000 people in Britain, of which about 5,000 are in manufacturing. It expects to invest more than 140 million pounds at other UK facilities between now and 2020.

Reuters notes that, “The moves show new Chief Executive Officer Emma Walmsley putting her mark on Britain’s biggest drugmaker as she tries to simplify operations, improve operating efficiencies and focus on priority area.”

Next week Walmsley will update investors during the company’s half-year financial report.

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