New Glaxo CEO Seeks Tighter Drug Focus -- WSJ

By Denise Roland Features Dow Jones Newswires

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.

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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.

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"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)