In 2017 GSK named a new CEO, Emma Walmsley. It turned out that she is just what the company needed.
Hal Barron (seated), CSO, GSK & Emma Walmsley, CEO, GSK
Emma Walmsley’s roots are linked to a French cosmetics giant L’Oréal, where she spent 17 years in a range of jobs in Paris, London and New York before travelling to China. There, she worked to accelerate the growth of global brands including L’Oréal Paris, Maybelline and Garnier, as well as Chinese skincare brand Mininurse. Emma Walmsley was seen in the eyes of many business leaders as a rising star in the industry and a natural contender for future positions in L’Oréal’s senior global management. Her decision to leave L’Oréal shocked insiders in China’s luxury community.
After a networking lunch with Andrew Witty, the CEO of British pharmaceuticals giant GlaxoSmithKline (GSK), her life turned upside down. Witty offered Walmsley a position of GSK’s global consumer healthcare business president. At that time, the unit was generating £5bn (€5.67bn) in net sales and was one of the company’s three main pillars alongside pharmaceuticals and vaccines.
Emma Walmsley has taken unprecedented steps to breathe new life into struggling GSK.
Emma Walmsley was firstly reserved about taking the job. She worried that she was not really prepared for the new responsibilities. Despite her doubts, she decided to take the opportunity. She moved back from China to her native England.
Already after six years GSK and Emma Walmsley again shocked the market. In 2017 Emma Walmsley was promoted to GSK’s CEO. GSK, the name behind Sensodyne toothpaste, lung treatment Advair, shingles vaccine Shingrix and many other products, entered into a whole new era. In FY 2018 the company generated £30.8bn in net sales and £5.5bn EBIT, with over 95,000 employees.
Emma – the “revitalizing” outsider
Since becoming the CEO of GSK, Emma Walmsley has faced a rocky transition period. Investors were questioning earnings expectations and GSK’s dividend policy. This created “real pressures” on the share price towards the end of 2017. As a response, GSK’s London-listed shares dropped from 1,650p (€18.67) at the time Walmsley took the helm to 1,290p (€14.60) at the end of 2017 and early 2018. Investors were questioning whether or not Emma is the person to address the company’s under-performance. Many of them didn’t really see the right person in her. Some major long-term investors, such as British fund manager Neil Woodfor, even sold all of their shares.
According to experts, the main reasons behind the poor company performance could be linked to R&D team and the company’s insistence on spreading its resources thinly over a large number of assets rather than zeroing in on a handful of potential blockbuster drugs. Roger Franklin, a Liberum analyst said that decision-making within the R&D organisation is slow, assets are languished in phase one and phase two studies for long periods, and there isn’t enough focus on assets that could really move the needle etc. Credit Suisse analysts went even further. They shocked with their opinion that they only see a sales potential of £1.2bn (€1.36bn) by 2022 from GSK’s pipeline, compared with an annual pharma and vaccines R&D spend of £3.4bn (€3.85bn).
Following a six-month listening tour, Emma Walmsley held a meeting with senior R&D executives to confront the issue of GSK’s lack of commercial successes. According to Fortune, Emma Walmsley had them watch a video of analysts outlining everything that was wrong with GSK’s R&D performance. After this, Emma Walmsley reportedly said: “Everything’s on the table here. The world is saying it’s broken. Let’s see if we can fix it.” And perhaps this was actually THE moment for her …
Since then, Emma Walmsley has totally refreshed GSK’s leadership, having changed about 40% of the top executives within months of becoming CEO. She gained respect from investors for bringing in well-known individuals. Emma Walmsley brought Hal Barron, ex president of R&D at tech giant Alphabet’s secretive anti-ageing start-up, Calico. The same Hal Barron, who has developed some of the biggest products in pharmaceuticals in the last couple of decades and is today one of the hottest names in terms of delivery and R&D. As Chief Scientific Officer and President of R&D, Barron immediately started to focus on topics such as speeding up the decision-making, making people accountable for their decisions, allocating resources to assets with the highest potential and so on. Another important new hire was Luke Miels, ex AstraZeneca’s executive. He was brought with the intention to fill the gap between the commercial aspects of a pharmaceutical business and the R&D organisation. Karenann Terrell, ex executive at Walmart, became GSK’s chief digital and technology officer.
GSK continued by terminating or divesting more than 30 drug development programmes in the process. They sold off the company’s rare disease unit and began a strategic review of its cephalosporins antibiotic business. Going forward, GSK strengthened its investments in oncology and immuno-inflammation while continuing to focus on its top therapy areas: respiratory conditions, HIV and infectious diseases.
Emma Walmsley visiting GSK’s production
Emma Walmsley pursued radical change at GSK. A change that was much needed for the serious business turnaround. She used her management expertise to begin a process of revitalizing the firm’s stagnation.
Financial Times was writing about her belief that having a fresh pair of eyes was actually incredibly helpful when deciding which therapy areas to be in or which assets to back, or which people to hire and fire. Perhaps it is even more important that she started to be convinced that she has the right to be at the top table and that she is genuinely happy with her new role and the fact that she is making a difference.
We must not forget also the fact that Emma Walmsley stands behind the decision to buy Novartis out of the consumer healthcare joint venture. GSK spent $13bn (€11.4bn) to take full control of the unit. Bringing all consumer revenues in house made it possible for the company to plan the next major business leap – MEGA merger with Pfizer, resulting in a cost savings of £0.5bn by 2022.
However, this was not the sole acquisition. Aside from the above, GSK also generated some positive buzz with a $300m (€263m) deal to partner with direct-to-consumer genetic testing company 23andMe. The partnership with the data-rich Silicon Valley company is expected to increase the chances of developing a blockbuster drug.
Furthermore, the company also acquired Tesaro, the maker of the ovarian cancer drug Zejula, for $5.1bn. The transaction is believed to strengthen GSK’s pharmaceutical business, accelerating the build of GSK’s pipeline and commercial capability in the area of oncology.
Emma Walmsley is shaping the future of one of the world’s biggest and oldest pharmaceutical firms at a crucial moment in its history. She indeed demonstrated that she will not shy away from tough decisions or new opportunities.
Although skeptics have doubted her ability to revive the struggling company, Emma Walmsley proved them wrong. Without any serious pharmaceutical experience, she is today the one that stands behind a major value creation steps of GSK. The share price performance since then and the decisions that she’s taken demonstrate that she has put the business on the right path. Forbes even named her as the most powerful woman in business outside the US.