Glaxo Ditches Raft of R&D Projects to Focus on Best Prospects -- Update
July 26 2017 - 9:44AM
Dow Jones News
By Denise Roland
LONDON-- GlaxoSmithKline PLC axed more than 30 drug-research
projects to focus on four key disease areas, in a push by new Chief
Executive Emma Walmsley to sharpen the company's
research-and-development operations.
U.K.-based Glaxo said Wednesday it would now focus its research
on respiratory diseases, HIV and other infectious diseases, cancer
and immuno-inflammatory conditions.
The company plans to pour more investment into 16 drug
candidates that it believes stand the best chance of becoming big
sellers, while shelving 13 drug-development programs and around 20
early-stage research projects.
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 Glaxo has spread its bets too thinly, hurting
its competitive edge, but said research investment would stay
roughly the same overall.
In making such a move just months into her tenure, Glaxo's new
boss is addressing a key investor concern: her lack of experience
in managing a pharmaceutical pipeline.
Ms. Walmsley, who became CEO on April 1, previously ran the
company's consumer health-care arm, which sells drugstore staples
like over-the-counter painkillers and toothpaste. Before joining
Glaxo, she had spent most of her career at French cosmetics company
L'Oreal SA.
The announcement came as Glaxo reported second-quarter
earnings.
Despite the strategic shift, the company made no change to its
long-term outlook. It maintained that annual sales growth would
come in at a low- to mid-single-digit percentage on average, to
2020. It said adjusted earnings per share would expand at a
mid-to-high single digit percentage annually, on average, in the
same period.
Glaxo shares were trading down 1.4% at GBP15.64 on Wednesday
afternoon.
It also cut its full-year guidance after spending GBP130 million
($169 million) on a priority review voucher, which grants it a
six-month review process from the U.S. Food & Drug
Administration, instead of the standard 10 months. Glaxo bought the
voucher from an unnamed drugmaker in the second quarter, and has
used it to speed the agency's review of the company's new two-drug
HIV regimen.
Priority review vouchers are awarded by the FDA to incentivize
the development of drugs for neglected diseases. But a secondary
market has sprung up where the original awardee can sell the
voucher to others at prices that can reach several hundreds of
millions of dollars.
The steep cost of the voucher contributed to Glaxo posting a net
loss of GBP180 million in the quarter. That compared with a GBP435
million loss a year earlier, when the company took a GBP1.8 billion
write-down after a sharp decline in the value of the pound
following the U.K.'s Brexit vote increased the value of its
liabilities.
The drugmaker said revenue increased 12% to GBP7.32 billion.
Analysts had expected a net profit of GBP1.14 billion and revenue
of GBP7.27 billion. Adjusted operating profit, a measure that
strips out one-time items, rose 14% to GBP2.08 billion, beating
analyst estimates of GBP2.02 billion.
Glaxo, which reports results in sterling but makes most of its
revenue in other currencies, is benefiting from the weakness of the
pound. Stripping out the currency effect, adjusted operating profit
was flat and revenue was up 3%.
Write to Denise Roland at Denise.Roland@wsj.com
(END) Dow Jones Newswires
July 26, 2017 09:29 ET (13:29 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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