By Denise Roland and Joann S. Lublin 

LONDON -- GlaxoSmithKline PLC said its head of consumer health care, Emma Walmsley, will succeed Andrew Witty as chief executive, a move that punctuates the company's growing emphasis on higher-volume, lower-margin drugstore staples such as toothpaste and painkillers.

Ms. Walmsley, 47 years old, will take up the post when Mr. Witty steps down March 31, making Glaxo the first top-tier pharmaceutical company to be led by a woman. Ms. Walmsley takes up the top job lacking the direct pharmaceutical experience that some investors had sought amid Glaxo's checkered record for developing new blockbuster drugs.

Instead, Ms. Walmsley spent most of her career at cosmetics company L'Oréal SA before joining Glaxo six years ago. Still, analysts and investors saw her as a strong internal contender for the job, given her experience in the sort of consumer-focused products that, under Mr. Witty, have become an increasingly important part of the company. Mr. Witty became CEO in 2008, and Glaxo in March announced his planned departure.

The board voted unanimously to elevate Ms. Walmsley, according to a Glaxo spokesman. She is well respected within the company, he said, having presided over a period of rapid expansion at the consumer unit after the formation of a joint venture with Novartis AG.

Glaxo declined to make Ms. Walmsley and Mr. Witty available for interviews.

Shares in Glaxo initially moved lower on the announcement, but settled flat in London on Tuesday.

"I would have preferred a pharmaceutical person and she clearly lacks that," said one investor. "The positive is anybody coming from outside of pharmaceuticals brings a fresh set of eyes." The investor said Ms. Walmsley's strong record for margin improvement made her a "good person" for the job, and that she could apply her brand-building experience to the pharmaceutical side of the business.

Andrew Baum, an analyst at Citi, said Ms. Walmsley's lack of pharmaceuticals experience wouldn't preclude her from improving Glaxo's research productivity, but said she would need to bring in some senior hires for that business.

Ms. Walmsley's consumer experience, however, lines up well with Glaxo's strategic shift engineered by Mr. Witty. While other major drug companies have increasingly focused on expensive new therapies for cancer and other diseases, Mr. Witty, 52, has put increasing emphasis on consumer-health-care products and vaccines.

He achieved that largely through a three-part, $20 billion deal with Novartis that involved swapping Glaxo's cancer-drug portfolio for the Swiss company's vaccines business and pooling their consumer-health-care businesses into a joint venture controlled by Glaxo.

Mr. Witty pushed the transaction as a way to reduce Glaxo's dependence on the risk-laden drug-discovery part of the business, which succeeds or fails on the outcomes of lengthy and expensive clinical trials, patent life cycles and the willingness of governments and health insurers to spend ever-tighter budgets on medicines. By contrast, vaccines and consumer health care are considered more stable businesses.

Since the Novartis deal closed last year, the consumer business has been an important source of growth for the company as its prescription-drug business struggles with the decline of its old blockbuster drug Advair.

Ms. Walmsley held marketing and general management roles at L'Oréal over 17 years in various regions, including Europe, the U.S. and China.

People familiar with the matter said Ms. Walmsley regularly weighs in on other parts of the business during executive team meetings.

Glaxo directors also liked the fact that Ms. Walmsley worked in a senior post in China during her time at L'Oréal, said another person familiar with the matter. In 2014, a Chinese court found a local subsidiary of Glaxo and five of its executives guilty of bribery, handing out suspended prison sentences, fining the company nearly $500 million and capping a high-profile scandal for the company there. Her prior China stint represented "another advantage," this person said.

The spokesman for Glaxo said "her experience in China was relevant," but added that Ms. Walmsley also worked in the U.S. and elsewhere in Europe. "Her international experience is what the board was recognizing," he said.

Other internal candidates considered for the job were Abbas Hussain, global head of pharmaceuticals, Roger Connor, head of manufacturing, and Jack Bailey, head of Glaxo's U.S. pharmaceuticals business, according to people familiar with the matter.

Ms. Walmsley's strategy at Glaxo's consumer business has been to champion a selection of so-called power brands, such as Sensodyne toothpaste.

The shift is starting to bear fruit across the company as a whole. Glaxo has posted solid revenue and earnings growth for the past few quarters. Still, Mr. Witty has had to defend the tack. Neil Woodford, a U.K. fund manager and one of Glaxo's biggest investors, has pushed for breaking up the company into its pharmaceutical, vaccines and consumer-health constituents.

A spokesman for Mr. Woodford declined to comment Tuesday.

Joe Walters, senior portfolio manager at Royal London Asset Management, said the appointment "suggests a strategy of evolution rather than revolution" and meant the company was unlikely to undergo any big structural changes.

Write to Denise Roland at Denise.Roland@wsj.com and Joann S. Lublin at joann.lublin@wsj.com

 

(END) Dow Jones Newswires

September 20, 2016 21:09 ET (01:09 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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