What next for GSK as new chairman takes position?


The appointment of a new chairman at GlaxoSmithKline (GSK) has led to questions about the future direction at the company, and the role of chief executive Sir Andrew Witty.

Last week, Sir Philip Hampton took over from Sir Christopher Gent – who had been in the role for more than 10 years – and lost little time affirming his support for the current CEO, saying he has the full support of the board.

The fact remains, though, that GSK has been through a particularly tricky period in which it has been behind its peers in the pharma industry, at least in terms of providing returns to shareholders. Lagging sales of its respiratory portfolio in the US thanks to downward pricing pressure, the Chinese corruption scandal last year that resulted in a £300 million fine and slower-than-expected take-up of some new products, have all taken their toll.

Last week, Sir Andrew promised investors a return to growth in 2016 on the back of the recently completed deal with Novartis, which saw GSK swap its oncology business in return for Novartis' vaccines and consumer health products, and also called off the previously-proposed spin-out of its profitable HIV joint venture ViiV Healthcare.

The decision to exit the cancer field at a time when momentum is building behind the category is out of step with the rest of the pharma industry, although Sir Andrew told the Financial Times in an interview this week that the strategy made perfect sense, building on areas where GSK is strong and exiting an increasingly competitive area where it lacks scale.

The emphasis is shifting more towards a volume business and away from one based on high-priced medicines that will tie in with rising demand for healthcare in emerging markets such as China, Brazil, Eastern Europe and India.

Demand in these countries is in the lower-priced product categories, said Sir Andrew, who pointed out that this to some extent sidesteps the issue of affordability of medicines in developed economies, which has been gaining momentum of late.

That ties in with GSK's reluctance to in-license a lot of biotech candidates that are facing a tougher, more competitive environment, as well as its decision to retain its current stake in ViiV and not sell off a block of mature drugs last December. Taken together, these opportunities also mean that the decline in sales of respiratory blockbuster Advair (salmeterol/fluticasone) when generics become available in the US will be mitigated.

Sir Philip, who was previously chairman of Royal Bank of Scotland (RBS), is no stranger to taking the helm in choppy waters, as he was instrumental in steering RBS as it coped with the implications of being bailed out by the UK government and whose appointment was shortly followed by the resignation of RBS' then CEO Fred Goodwin.

After taking on the GSK chairmanship he said Sir Andrew "has the complete support of the board," adding: "There are always shareholders who have points to make, but I certainly hope Andrew is here for a good while to come."

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