The new CEO of GlaxoSmithKline (LON:GSK), Emma Walmsley, has decided the Brentford, United Kingdom-based pharma company will narrow down their drug research to focus better on what she says are the biggest opportunities at this time. She took over as the Chef Executive on April 1st but is facing a cash crunch because of the many drug launches in recent times.
GlaxoSmithKline to Set Their Priorities Right
Emma says, Glaxo wants “more focused priorities”, which would give them fewer, but bigger launches. “Perhaps we have pursued the development of drugs which may be interesting, but in the competitive environment and versus other options we do not have the scale opportunities we would like, so we will be stopping some of those”, she adds.
So Glaxo now wants to be selective with the drugs that are in the early stages of development. The investors will be happy with this new line of the company as there have been quite a few high-profile failures in recent times that have cost the business a lot of money. In fact, Glaxo’s low research productivity has been a fundamental problem with their investors.
Emma Walmsley says GlaxoSmithKline will divulge more details about the research areas where they want to invest more money and time when the second quarter results of the company are brought out in July.
Glaxo Diversified to Reduce Risks
In fact, not just Emma, but her predecessor, Andrew Witty also realized that the company was probably spending more on bad research, and this is why he wanted to lower their dependence on the risky pharmacy business, where success often depends on the results of expensive, and uncertain clinical trials. After all, years of spending money on a certain R&D may come to nothing at the end. This is why expanded the presence of Glaxo in many vaccines and consumer healthcare areas, a term used for drugstore staples like over-the-counter painkillers and toothpaste.
GlaxoSmithKline went into this after signing a deal with Novartis AG, which was worth $20 billion.
Emma agrees with Andrew on this, and says, “There is both logic and benefit to having three businesses”. The company’s balance sheet too shows the logic of this approach. Consumer health care and vaccines generated more reliable cash flow for Glaxo (LON:GSK). Vaccines have particularly well, especially the new Bexsero meningitis B vaccine.