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New GlaxoSmithKline CEO wants fewer, bigger new drug launches

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04/26/2017 | 04:59pm CEST
FILE PHOTO: Signage for GlaxoSmithKline is seen on its offices in London

GlaxoSmithKline's (>> GlaxoSmithKline plc) new chief executive aims to improve returns in drug development, and wants fewer but bigger new medicine launches.

GlaxoSmithKline's (>> GlaxoSmithKline plc) new chief executive aims to improve returns in drug development, and wants fewer but bigger new medicine launches.

In her first comments since taking over on April 1, Emma Walmsley, 47, said on Wednesday that her priority was the pharmaceuticals unit, where she wants commercial considerations to be given greater weight in early investment decisions.

"We'd like to have probably fewer and more focussed priorities, to have bigger launches," she told reporters, after announcing first-quarter results, adding this would involve tough choices and the closure of some research programmes.

Her approach represents a shift for GSK, which has recently had a large number of new drug launches but has not come up with the kind of multibillion-dollar blockbusters produced by Big Pharma rivals.

Walmsley, who previously headed GSK's consumer division after 17 years at L'Oreal (>> L'Oreal), said she would set out her detailed vision for the company alongside half-year results in July.

Under previous CEO Andrew Witty, GSK has built up a diversified business, with its core pharmaceuticals operation buttressed by large consumer health and vaccine units - a structure Walmsley said had "both logic and benefit".

Still, the company has struggled to deliver decent returns to investors for around five years, due to sluggish drug sales, although in recent quarters it has returned to steady growth.

Since last June, it has been buoyed by a drop in sterling in the wake of the Brexit vote, which has flattered results since the vast majority of its sales are made overseas.

First-quarter results were slightly better than expected, keeping Britain's biggest drugmaker on track to hit financial targets in 2017 as it braces for generic competition to blockbuster lung drug Advair.

Sales and adjusted earnings per share (EPS) rose 19 and 31 percent respectively to 7.38 billion pounds and 25.0 pence. Analysts, on average, had forecast sales of 7.26 billion pounds and EPS of 24.5p, according to Thomson Reuters data.

"This is a positive start for the year with sales growth in all three of our businesses and an improvement in the group's operating margin," Walmsley said.

However, Deutsche Bank analyst Richard Parkes said sales were boosted in large part by a strong vaccines performance, thanks to several big orders falling in the quarter, and GSK shares slipped around 1.5 percent.


Walmsley is the first woman to lead a top global drugmaker and stands out among Big Pharma bosses as a consumer brands guru rather than a prescription medicines expert.

She is set to continue funding GSK's dividend, a major lure for investors, at an unchanged level this year. That still leaves her scope for deals, which she said would most likely involve buying in early-stage experimental drugs.

"We will be continuing to look externally, if that is the right way for us to make sure we have a really strong pipeline to deliver returns," she said.

GSK last month won a short-term reprieve from the threat of generic Advair when the U.S. Food and Drug Administration delayed approval of Mylan's (>> Mylan NV) copy of the inhaler for asthma and chronic lung disease.

But with another substitutable Advair generic from Hikma (>> Hikma Pharmaceuticals Plc) potentially winning a green light by May 10, GSK reiterated that generic Advair could still dent full-year profits.

It predicts that EPS, in constant currencies, will be flat to slightly lower in 2017, if substitutable Advair generics arrive in the United States by mid-year. If they don't launch in 2017, EPS should rise between 5 and 7 percent.

With Advair generics looming, GSK needs to prove it can maintain its lead in the respiratory medicine field, where an experimental three-in-one drug inhaler will be critical to future success.

It also faces competition in HIV treatment, where Gilead's (>> Gilead Sciences, Inc.) new drug bictegravir is shaping up as a potent rival to GSK's best-selling dolutegravir.

Significantly, Walmsley's first senior appointment as CEO-designate was to poach Luke Miels from AstraZeneca (>> AstraZeneca plc) as head of pharma, making him a key lieutenant as the company prepares for the next big wave of new drug launches in the 2020s. GSK is discussing his start date with AstraZeneca.

(Editing by Martinne Geller)

By Ben Hirschler

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Financials ($)
Sales 2017 2 188 M
EBIT 2017 477 M
Net income 2017 269 M
Debt 2017 478 M
Yield 2017 1,34%
P/E ratio 2017 22,45
P/E ratio 2018 16,75
EV / Sales 2017 2,95x
EV / Sales 2018 2,57x
Capitalization 5 987 M
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Mean consensus OUTPERFORM
Number of Analysts 12
Average target price 29,1 $
Spread / Average Target 17%
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Samih Said Samih Darwazah Chairman & Chief Executive Officer
Khalid Nabilsi Chief Financial Officer
Ibrahim Jalal Senior Vice President-Technical Affairs
Ragheb Al-Shakhshir Vice President-Research & Development
Michael Richard Dwyer Ashton Independent Non-Executive Director
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