GSK GSK plc

By Denise Roland 

LONDON-- GlaxoSmithKline PLC said its head of consumer health care, Emma Walmsley, will succeed Andrew Witty as chief executive, in a move that cements the company's shift away from its dominant prescription-medicine business.

Ms. Walmsley, 47 years old, will take up the post when Mr. Witty steps down on March 31, making Glaxo the only top-tier pharmaceutical company to be led by a woman. The consumer health-care division, which she has run since 2010, sells drugstore staples such as toothpaste and painkillers.

Her appointment is likely to draw a mixed response from investors given her lack of direct pharmaceutical experience. Ms. Walmsley spent most of her career at cosmetics giant L'Oréal SA before joining Glaxo six years ago.

Some investors were eager to see an executive with experience in managing the development of innovative drugs take up the role, to breathe new life into the company's drug pipeline, which has suffered some setbacks in recent years.

Still, it won't have come as a big surprise: Ms. Walmsley was widely touted as a strong internal contender for the job.

The decision was uncontroversial within Glaxo's management: The board voted unanimously that she should succeed Mr. Witty, according to a person familiar with the situation. Ms. Walmsley is well respected within the company, having presided over a period of rapid expansion of Glaxo's consumer-health-care unit following the formation of a joint venture with Novartis AG.

"She has been very clear with the board that an absolute priority will be fostering and boosting innovative drugs," the person said. "She recognizes the potential that has for the company's performance in the near and medium term."

The person added that Ms. Walmsley regularly weighs in on other parts of the business during executive board meetings. "Just because they're not talking about consumer" doesn't mean she lacks a point of view, the person said.

Andrew Baum, an analyst at Citi, said Ms. Walmsley could improve Glaxo's research productivity despite her lack of experience in that area as long as she undertook a critical assessment of the company's research outcomes and made some senior hires in the pharmaceuticals business.

Ms. Walmsley won't have the luxury of focusing squarely on the pharmaceuticals business. She will take the reins in the middle of a strategic shift engineered by her predecessor. While other major drug companies increasingly focus on expensive new therapies for cancer and other diseases, Mr. Witty, 52, has put increasing emphasis on low-margin, high-volume 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 the U.K. company.

Mr. Witty engineered the transaction 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 that deal closed last year, the consumer-health-care business has been a key source of growth for the company as its huge prescription-drug business struggles with the decline of its old blockbuster drug Advair.

Ms. Walmsley's strategy: to champion a selection of "power brands," such as toothpaste Sensodyne, where she believes the consumer-health-care division can achieve the strongest growth.

The deal is also starting to bear fruit across the company as a whole. Glaxo has posted solid revenue and earnings growth for the past few quarters.

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. Neil Woodford, a prominent U.K. fund manager and one of Glaxo's biggest investors, is pushing for breaking up the company into its pharmaceutical, vaccines and consumer-health-care constituents.

After trading down earlier in Tuesday's session, Glaxo shares were lately up 0.3% to GBP16.50 ($21.53) in London.

Write to Denise Roland at Denise.Roland@wsj.com

(END) Dow Jones Newswires

September 20, 2016 09:34 ET (13:34 GMT)

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