Tuesday, April 12, 2022

GSK’s Emma Walmsley vows to lead drugs firm through corporate split

GlaxoSmithKline’s chief executive, Emma Walmsley, has vowed to lead the company through next year’s corporate split and beyond and to keep research spending high, as she came under mounting pressure to improve the drugmaker’s performance after a decline in profits and the arrival of the activist shareholder Elliott.

GSK’s first quarter revenues slid by 18% to £7.4bn between January and March compared with the same period in 2020, while pretax profits dropped 17% to £1.5bn, but Walmsley said the “supertanker” company’s performance would improve in the second half of the year.

The group’s vaccine division has been hit by travel restrictions imposed during the pandemic – which has led to fewer travel jabs – and governments prioritising Covid-19 vaccines over others such as GSK’s shingles shot, Shingrix. In addition, last year’s “pantry loading” of many medicines at the start of the pandemic was not repeated.

Next summer, GSK will split itself into a consumer health venture and a business that brings together pharmaceuticals, HIV and vaccines, currently known as New GSK.

Walmsley insisted that she would “lead GSK through that separation and beyond”, faced with an aggressive new shareholder, the US hedge fund Elliott, which has taken a sizeable stake to push for change.

“We have made an enormous amount of change in this supertanker of a company in recent years and we have made progress,” she said. “There is definitely more to be made, but I am very confident that we can lay out a pathway in June for a new GSK that will demonstrate a positive future ahead.”

Walmsley and her team will give a 10-year outlook for the business at an investor day on 23 June. GSK needs to replenish its portfolio of new drugs but has suffered a series of setbacks – for example, the cancer drug bintrafusp alfa failed a key late-stage trial in January. Its head of vaccine research, Emmanuel Hanon, left recently after the company, one of the biggest vaccine makers in the world, fell behind in the race to develop a Covid-19 vaccine.

Its partnership with the French drugmaker Sanofi has been hit by delays, but results from intermediate trials are expected next month. GSK has also teamed up with Germany’s CureVac to develop a next-generation mRNA vaccine that is effective against multiple variants, and has started developing a separate mRNA vaccine on its own, in a move to catch up with rivals.

Walmsley hailed recent successes such as the launch of the HIV drug Cabenuva, and the start of late-stage clinical trials for a vaccine for RSV (respiratory syncytial virus – a leading cause of pneumonia and bronchiolitis in young children), which has the same commercial potential as Shingrix, and a new long-acting treatment for severe asthma. She said GSK’s late-stage pipeline had doubled in recent years and it now had 20 products that could be launched by 2026.

Under her leadership, research and development spending has risen to 15% of revenues, from £3.5bn in 2016 before she took the helm to just over £5bn last year. This is set to rise further this year.

Faced with criticism of her non-scientific background from some investors, Walmsley asserted her position. “I am not a scientist; I am a business leader,” she said. “The priorities as the CEO are to set the strategy … hire the people and included in that has been hiring the best possible R&D leadership in the world.”

GSK’s pharmaceutical business made nearly £4bn in revenues in the first quarter, down 8%, while the vaccines division generated £1.2bn, down 30%.

As Covid-19 vaccination campaigns progress rapidly in many western countries, especially the US and the UK, GSK expects healthcare systems and consumer trends to return to more normal levels later this year. This means that revenues from vaccines and pharmaceuticals should grow at up to low-single digit percentage points this year, while consumer healthcare is expected to grow at low to mid-single digits.

Shares in GSK dipped slightly to £13.36 at the close.

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