GlaxoSmithKline's new boss streamlines R&D, axes
slew of drugs
GlaxoSmithKline's new chief executive announced plans
on Wednesday to narrow the focus of the group's drug research by ditching more
than 30 drug projects to improve returns in its core pharmaceuticals business.
Emma Walmsley, who took over in April, said GSK would
in future allocate 80 percent of its R&D budget to respiratory and
HIV/infectious diseases, along with two other potential areas of oncology and
immuno-inflammation.
Thirteen clinical and around 20 pre-clinical
programmes will be stopped, partnered or divested, and the group is considering
options for its rare diseases unit after a strategic review.
It also plans to stop selling the struggling diabetes
drug Tanzeum and end a collaboration with Johnson & Johnson over
experimental rheumatoid arthritis drug sirukumab, as well as divesting around
130 old drugs with limited sales.
GSK has lagged behind rivals recently in producing
multibillion-dollar blockbusters and has suffered a number of high-profile
failures, undermining faith in its R&D skills.
"We've been too broadly spread," Walmsley
told reporters, adding that the overhaul would not result in a lower R&D
budget because GSK had been investing too little in individual experimental
drugs in the past.
Indeed, spending could rise as Walmsley and her team
go shopping for promising early-stage experimental drugs to bolster the
pipeline in GSK's priority areas.
The announcement came as Britain's biggest drugmaker
reported a 12 percent rise in adjusted earnings per share in sterling terms to
27.2 pence on sales up 12 percent at 7.32 billion pounds ($9.53 billion).
Analysts, on average, had forecast EPS of 26.2 pence
and sales of 7.26 billion pounds, according to Thomson Reuters data.
The group reiterated its outlook for 2020, first given
in 2015, forecasting sales growth of low-to-mid single digits and adjusted
earnings of mid-to-high single digits on a constant currency basis.
For 2017, it now sees EPS growth of 3-5 percent,
against 5-7 percent predicted previously, following investment in a
"priority review voucher" to accelerate U.S. approval of a new HIV
medicine.
FILE PHOTO: The GlaxoSmithKline building is pictured
in Hounslow, west London June 18, 2013.Luke MacGregor/File Photo
Shares in the group fell 1.3 percent by 1400 GMT, with
some investors disappointed that Walmsley had not taken the opportunity to
increase long-term financial targets.
Given that she announced an extended cost-cutting
programme to deliver an additional 1 billion pounds of annual cost savings by
2020, UBS analyst Michael Leuchten said the cautious approach "suggests
tougher underlying trends".
Following Astrazeneca
Walmsley, who previously headed GSK's consumer health
unit after 17 years working for L'Oreal, is known for her focus on benchmarking
business performance and had been expected to revamp pharma R&D.
She had previously said she was considering the
divestment of older antibiotics and planning to sell two UK nutritional brands.
Overhauling GSK's R&D machine is her biggest task,
however, and she wants scientific and commercial teams to work closely together
to pick winners.
The changes will take time to deliver results but
Walmsley does have a window as GSK is not expecting its next wave of new drugs
until after 2020. It also has no further major patent expiries until 2026.
To some extent GSK is following in the footsteps of
its smaller British rival AstraZeneca, which has divested a large number of
non-core drug projects recently. Significantly, former AstraZeneca executive
Luke Miels, who joins in September, will be a key lieutenant for Walmsley
during the shake-up.
GSK benefited once again in the quarter from a weak
pound, after last year's Brexit vote, as well as strong demand for HIV
medicines and the failure, so far, of generic firms to win U.S. approval for
copies of its inhaled lung drug Advair.
But HIV competition is set to increase next year and
U.S. generics to Advair, which has generated more than $1 billion in annual
sales for GSK since 2001, are likely by mid-2018.
The company extended a commitment to pay its current
80 pence per share annual dividend through 2018.
(This version of the story adds dropped first name of
CEO in second paragraph)
Ben Hirschler, Reuters -Additional reporting by Kate
Holton, editing by Louise Heavens and Adrian Croft
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