GlaxoSmithKline’s new boss streamlines R&D, axes slew of drugs

By Ben Hirschler

LONDON (Reuters) – 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.

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…

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