New Glaxo-Smith-Kline CEO Emma Walmsley prepares for R&D choices, potential deals

LONDON — Emma Walmsley, Glaxo-Smith-Kline’s ( GSK) incoming CEO, will take over Britain’s biggest drug maker at a challenging time but the 47-year- old also inherits the flexibility to do deals and make key choices on new drugs.

Just four days before Walmsley moves into the top job on April 1, US regulators could approve the first substitutable generic version of GSK’s inhaled lung drug Advair, which has raked in more than a $ 1 billion in sales every year since 2001.

Walmsley is expected to formally present her strategic vision for the company in the summer.

Investors, however, will get an indication of how she views the Advair threat on Wednesday, when GSK gives its 2017 outlook alongside full- year earnings. While Walmsley will not be on the results call, she has been closely involved in the forecasts.

Navigating GSK through the loss of Advair, assuming US generics are approved, is the biggest near- term challenge and will demand a sharp focus on maintaining sales momentum for GSK’s newer respiratory drugs Breo, Anoro, Incruse and Nucala.

Other hurdles to come include trying to improve GSK’s relatively weak pharma growth at a time when US President Donald Trump criticizes high drug prices in its largest market.

It is arguably better placed than some to weather such pressure, given its highvolume, lower- margin strategy set in place by outgoing CEO Andrew Witty at a time when much of the industry was focused on expensive drugs for rare diseases.

A solid consumer health business, led by Walmsley since 2010, selling everything from painkillers to toothpaste, has added stability, while a weak pound has provided a windfall.

That has helped blow away fears about dividend payouts and has increased the scope for acquisitions, with Goldman Sachs analysts citing “pro- growth capital allocation” as a key strategic option for Walmsley.

One big deal could come next year if Novartis opts to sell its minority stake in GSK’s consumer business.

R& D DECISIONS

At the same time, there are important choices to be made in the key pharmaceuticals division, which still accounts for nearly 70% of operating profits, despite the recent expansion of vaccines and consumer health.

GSK expects to get important clinical trial results on around 25 products in development over the next 18 to 24 months.

“The big value generator for the company is going to be getting a decent yield from that dataset and then making exquisitely good decisions about prioritization,” Witty told Reuters in a recent interview.

With a background in shampoo and cosmetics, after 17 years at L’Oreal, Walmsley’s expertise is far from the lab bench, although she has taken a crash course in pharma R& D since September, according to company insiders.

She needs to get up to speed as GSK heads into a period of intensified R& D activity, which could see the drug pipeline become a more important part of its investment case.

Significantly, Walmsley’s first senior appointment decision as CEO- designate was to hire Luke Miels from Astra-Zeneca as head of pharmaceuticals, making him her key pharma lieutenant alongside GSK’s research boss Patrick Vallance.

“She and Luke and Patrick are going to be opening the envelopes together, making the choices and then living with them. You’ll have a team that is accountable right from the get- go,” Witty said.

In the meantime, GSK’s top priority is to continue the momentum of the core drugs business, which has enjoyed strong sales of HIV medicines but could soon face competition from a new Gilead drug.

Despite the imminent threat to Advair from cheap generics, Thomson Reuters data shows analysts expect GSK’s earnings to rise steadily over the next three years, leaving little room for missteps. —