First assessment of radical reorganization imposed by GSK new CEO Emma Walmsley

The Wall Street Journal yesterday published a long article about the managerial style adopted by Emma Walmsley, CEO of Britain’s group GSK. Total restructuring seems to be the 48-year-old new CEO’s watchword, indeed since her appointment as many as 125 executives have been dismissed and replaced  by new managers, often coming from competitors.  400 scientists have lost their jobs or, at best, changed their job inside the group. Moreover, Walmsley has ordered to interrupt as many as two dozens clinical trials so as to focus on few, specific therapeutic areas. In Walmsley’s opinion, GSK’s problems are the lack of a specific focus and a low return of capital for R&D investments, which between 2007 and 2016 was as much as 3%–far below other drugmakers such as Celgene (30%), Gilead (21%) and Novo Nordisk (15%). R&D investments will be approximately $6.3bn in 2017 and will be especially addressed to respiratory, HIV, oncology and autoimmune diseases divisions. The new CEO has said she intends to tap more resources to develop new prescription drugs–in sharp contrast to the strategy adopted by predecessor Andrew Witty, who spent part of his 9 years as CEO developing the Consumer Health arm.  The new course has clearly not convinced many investors, indeed GSK’s shares have dropped over 21%, while the S&P Global 1200 Health Care Index has risen more than 6% over the same period. Radical price cuts will be made in the next few years and Walmsley expects to save $1.4bn before 2020 and to close down at least 9 production sites.

(Source: WSJ)