New Glaxo CEO Seeks Tighter Drug Focus -- WSJ
April 27 2017 - 3:02AM
Dow Jones News
By Denise Roland
GlaxoSmithKline PLC's new boss, Emma Walmsley, said Wednesday
that she plans to narrow the company's drug research to focus only
on the biggest opportunities.
Ms. Walmsley, who became chief executive on April 1, faces a
sparse late-stage pipeline emptied by several recent drug launches.
It falls to her to place big bets on the drugs in earlier-stage
development that hold most promise.
She said she wanted "more focused priorities" in drug research
that would lead to fewer, but bigger, launches.
"Perhaps we have pursued the development of drugs which may be
interesting, but in the competitive environment and versus other
options we [do not have the] scale opportunities we would like, so
we will be stopping some of those," Ms. Walmsley said.
Glaxo's low research productivity is viewed as a fundamental
problem by investors, who have been stung by some high-profile
failures in recent years. Ms. Walmsley said the company would
provide more details on its plans when it announces second-quarter
results in July.
Ms. Walmsley said she supported her predecessor Andrew Witty's
strategy of lowering the company's reliance on the company's
risk-laden pharmaceutical business, where success depends on the
outcome of uncertain, and expensive, clinical trials. Mr. Witty
expanded Glaxo's presence in vaccines and consumer health care -- a
term for drugstore staples such as toothpaste and over-the-counter
painkillers -- largely through a $20 billion deal with Novartis
AG.
"There is both logic and benefit to having three businesses,"
she said, adding that vaccines and consumer health care generated
more reliable cash flow for Glaxo.
Ms. Walmsley's remarks came as Glaxo posted solid revenue and
earnings growth for the first quarter of the year on strong sales
of newer drugs like HIV pill Tivicay, and a boost from the weakness
of the pound.
Adjusted operating profit, a measure that strips out one-time
items, rose 30% to 1.98 billion pounds, while revenue climbed 19%
to 7.38 billion. Net income nearly quadrupled to GBP1.05 billion,
from 282 million a year ago, when earnings were hurt by a 489
million pound charge related to the re-evaluation of various joint
ventures.
Glaxo, which reports in sterling but makes most of its revenue
in other currencies, is benefiting from the weakness of the pound,
which has fallen some 15% against the U.S. dollar and 10% against
the euro since the U.K. voted to leave the European Union on June
23 last year. Stripping out the currency effect, adjusted operating
profit rose 9% and revenue climbed 5%.
The company maintained the two-sided guidance it issued earlier
this year to reflect the possible launch of a cheap substitution
for its best-selling Advair inhaler. It reiterated that the entry
of such a product would scuttle earnings growth, but that in the
absence of a new competitor, core earnings per share would increase
5% to 7% at constant exchange rates.
Advair lost patent protection in 2010, but the complexities of
mimicking the action of an inhaled drug has delayed the arrival of
generic versions. The most advanced Advair generic, by Mylan NV,
was rejected by U.S. regulators in March, but another from Hikma
PLC is up for review in May.
Write to Denise Roland at Denise.Roland@wsj.com
(END) Dow Jones Newswires
April 27, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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