* Walmsley takes over April 1 as generic Advair threat looms
* 2017 outlook likely to incorporate Advair risks
* Options for new CEO include deals and drug R&D choices
By Ben Hirschler
LONDON, Feb 6 Emma Walmsley, GlaxoSmithKline's
incoming CEO, will take over Britain's biggest drugmaker
at a challenging time but the 47-year-old also inherits the
flexibility to do deals and make key choices on new drugs.
Just four days before Walmsley moves into the top job on
April 1, U.S. regulators could approve the first substitutable
generic version of GSK's inhaled lung drug Advair, which has
raked in more than a $1 billion in sales every year since 2001.
Walmsley is expected to formally present her strategic
vision for the company in the summer.
Investors, however, will get an indication of how she views
the Advair threat on Wednesday, when GSK gives its 2017 outlook
alongside full-year earnings. While Walmsley will not be on the
results call, she has been closely involved in the forecasts.
Navigating GSK through the loss of Advair, assuming U.S.
generics are approved, is the biggest near-term challenge and
will demand a sharp focus on maintaining sales momentum for
GSK's newer respiratory drugs Breo, Anoro, Incruse and Nucala.
Other hurdles to come include trying to improve GSK's
relatively weak pharma growth at a time when U.S. President
Donald Trump criticises high drug prices in its largest market.
It is arguably better placed than some to weather such
pressure, given its high-volume, lower-margin strategy set in
place by outgoing CEO Andrew Witty at a time when much of the
industry was focused on expensive drugs for rare diseases.
A solid consumer health business, led by Walmsley since
2010, selling everything from painkillers to toothpaste, has
added stability, while a weak pound has provided a windfall.
That has helped blow away fears about dividend payouts and
has increased the scope for acquisitions, with Goldman Sachs
analysts citing "pro-growth capital allocation" as a key
strategic option for Walmsley.
One big deal could come next year if Novartis opts
to sell its minority stake in GSK's consumer business.
At the same time, there are important choices to be made in
the key pharmaceuticals division, which still accounts for
nearly 70 percent of operating profits, despite the recent
expansion of vaccines and consumer health.
GSK expects to get important clinical trial results on
around 25 products in development over the next 18 to 24 months.
"The big value generator for the company is going to be
getting a decent yield from that dataset and then making
exquisitely good decisions about prioritisation," Witty told
Reuters in a recent interview.
With a background in shampoo and cosmetics, after 17 years
at L'Oreal, Walmsley's expertise is far from the lab
bench, although she has taken a crash course in pharma R&D since
September, according to company insiders.
She needs to get up to speed as GSK heads into a period of
intensified R&D activity, which could see the drug pipeline
become a more important part of its investment case.
Significantly, Walmsley's first senior appointment decision
as CEO-designate was to hire Luke Miels from AstraZeneca
as head of pharmaceuticals, making him her key pharma lieutenant
alongside GSK's research boss Patrick Vallance.
"She and Luke and Patrick are going to be opening the
envelopes together, making the choices and then living with
them. You'll have a team that is accountable right from the
get-go," Witty said.
In the meantime, GSK's top priority is to continue the
momentum of the core drugs business, which has enjoyed strong
sales of HIV medicines but could soon face competition from a
new Gilead drug.
Despite the imminent threat to Advair from cheap generics,
Thomson Reuters data shows analysts expect GSK's earnings to
rise steadily over the next three years, leaving little room for
(Editing by Alexander Smith)