Drug of choice
Glaxo’s new boss is focusing the firm on blockbuster remedies as it targets the US
EMMA WALMSLEY has laid out plans to overhaul GSK into a leaner business with “more edge”, which fast-tracks the development of blockbuster drugs and prioritises growth in the US.
As part of a new £1bn cost-cutting initiative, the FTSE 100 firm will ditch 30 commercially unattractive drug development programmes and consider the sale of its rare diseases business.
It also plans to offload more than 130 drug brands, over a fifth of its total, with sales of almost £500m.
Drugs losing support include treatments for diabetes and rheumatoid arthritis. Ms Walmsley unveiled the radical move in her first set of interim results since taking over from Sir Andrew Witty as chief executive.
She wants GSK to plough four fifths of its R&D cash into “priority” therapies with more profit potential in respiratory, HIV and its fledgling fields of oncology and immuno-inflammation.
“It’s about putting science very much at the core of our business and prioritising the strengthening of the pipeline,” she said.
Investors welcomed the restructuring but were disappointed Ms Walmsley did not take the opportunity to upgrade financial guidance to 2020 despite the fresh round of cost-cutting. GSK’S share price fell nearly 3pc following the announcement.
Half-year sales climbed 15pc to £14.7bn, up from £12.8bn the previous year, while net profit hit £1.3bn, slightly ahead of analyst forecasts.
Ms Walmsley, who took the helm from Sir Andrew in April, said the company’s culture needed to change to improve financial performance, noting: “We need to bring more edge, more of a performance focus, more accountability, more pace into our decisionmaking and more cash consciousness.”
She also said she would make “the US number one” in her expansion plans, with GSK’S businesses in emerging markets to be reviewed.
The US emphasis was “nothing to do with Brexit”, Ms Walmsley said, but she stressed the UK’S £60bn drugs sector needed “at least two years” or “as long as possible” to prepare for the UK’S withdrawal from the EU.
She said investors could expect further changes in the “top 200” roles in the company after the recent major hires of Luke Miels from Astrazeneca, to run the drugs business, and former Walmart executive Karenann Terrell, as chief digital and technology officer.
Ms Walmsley reiterated she would not break up GSK – which has three divisions in pharmaceuticals, consumer healthcare and vaccines – despite calls to do so by star investor Neil Woodford, who dumped his £1bn stake in the company in May.
The streamlining of the drugs business, which accounts for more than half of GSK’S £27.9bn annual sales, follows Ms Walmsley’s announcement of plans to cut back the firm’s consumer healthcare division last week, including selling century-old drinks brand Horlicks and cutting 320 jobs.
These actions are part of the £1bn cost-cutting plan. The firm also downgraded its earnings per share forecast for the full year from 5-7pc to 3-5pc, reflecting the $130m (£100m) purchase of a US priority review voucher for a potential new HIV treatment.