GSK Curbs Rumours of a Consumer Health Cull in Q2

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In a pharmaceutical environment faced with stiffening regulatory regimes, and where mergers and acquisitions become more commonplace, GSK’s diversifications and growth model have long come into question. Historically, Big Pharma would work as a one-stop-shop for medicine solutions covering all therapeutic areas, and over the years, companies opened up new brands and operating arms with many innovators even bolting on generics capabilities such as Novartis’ Sandoz and Sanofi’s Zentiva. Nowadays, however, commentators observe massive consolidation to be the name of the game with regular asset swaps occurring and Big Pharma tending to double down on their traditional specialty strengths, while jettisoning everything else in the process.

“Upon the release of Q2 results on July 25, the phrase “major new restructuring programme”, appeared as one of the Financial Highlights, which may have led investors to further believe that the company finally looked to spin-off the group’s consumer healthcare competencies.”

Now valued at GBP 77 billion, GSK has been something of an outlier in maintaining an expansive portfolio, simultaneously offering vaccines, Rx unit innovation, and an unwieldy consumer healthcare that spans household names including Sensodyne and Nicorette. In contrast to a specialty pharmaceuticals company, the strategy is categorized so that if one product falters, a similar or substitute product can jump in to pick up the slack. David Redfern, Chief Strategy Officer at GSK, makes clear: “It’s no secret that we are a fierce proponent of the diversified model and maintain a global business spanning consumer healthcare, vaccines, and pharma.” Pharmaceuticals generate over half of their £30 billion revenues and have been cause for concern recently, growing a meager 1 percent in the first half of 2018.  For many, therefore, a solution is found in shedding consumer healthcare segment to concentrate on GSK’s bread and butter high-end innovation.

Emma Walmsley, CEO since April 2017, however, could be expected to disagree. She rose up the ranks of L’Oréal before heading up GSK Consumer Healthcare, Europe and was instrumental in the Novartis and GSK consumer healthcare deal of 2015. Nevertheless the rumour mill has continued to turn, exacerbated by reports that Chairman Philip Hampton discussed the subject with shareholders during Q1. Upon the release of Q2 results on July 25, the phrase “major new restructuring programme”, appeared as one of the Financial Highlights, which may have led investors to further believe that the company finally looked to spin-off the group’s consumer healthcare competencies. Moreover, the company’s leadership has been unwavering in stating that the priority will be squarely on GSK’s core pharmaceuticals division and reinvigorating an underperforming discovery pipeline.

Further evidence of GSK’s shift of attention towards the innovative side of the business can be ascertained from the recent acquisition of 23andme – an entity which, according to Walmsley, constitutes “the world’s leading consumer genetics and research company.” Hal Barron, GSK’s CSO based in the San Francisco Bay Area, claims this will form part of “the next phase of innovation in R&D.” 23andme is a Silicon Valley-based personal genomics and biotech company best known for its saliva test kits that provide an insight into genetic ancestry and which were labelled “invention of the year,” by Time magazine in 2008. Crucially, 23andme tees up an enormous database—five million customers and counting—of human genetics, which will allow faster recruitment for clinical studies; and, reportedly, GSK sees immense potential for leveraging these capabilities in the quest to determine new therapies for countering Parkinson’s disease.

By forging ahead with GSK’s new “smart-risk” taking culture, Walmsley may yet be able to silence the gossip for another quarter, and with excellent sales thanks to Shingrix, a flagship shingles vaccine – indeed, overall vaccine growth in Q2 is 14 percent – the company looks set to press ahead with its conventional three-pronged program, only that, this time, the balance of emphasis has somewhat shifted.

TAGS: GSK, Pharma, Strategy, R&D,

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