GlaxoSmithKline stops development of 30 pipeline prospects, mulls sale of rare disease unit as new CEO Walmsley makes her mark

GlaxoSmithKline is scrapping more than 30 drug development programs. The major cull of pipeline prospects will see GSK focus 80% of its R&D budget on the top candidates in four therapeutic areas and potentially exit the rare disease space.

Emma Walmsley unveiled the overhaul of GSK’s R&D priorities at the end of her first full quarter as CEO. Walmsley is focusing GSK’s attention on two therapeutic areas in which it already has a sizable presence—respiratory and HIV/infectious diseases—and two in which it aspires to grow—oncology and immuno-inflammation. GSK will spend 80% of its R&D budget on top prospects in these areas.

This spending will lead to a series of data drops over the next few years that will dictate whether the chosen assets justify GSK’s faith in them. GSK also plans to spend cash to bring early-stage assets discovered elsewhere into its pipeline to boost its prospects in its four priority areas. 

The focus on these areas shunts more than 30 experimental drugs to the bottom of GSK’s list of priorities. The Big Pharma plans to terminate, partner or divest these preclinical and clinical programs. But by stating it thinks the assets are unlikely to generate sufficient returns it has done little to burnish the drugs’ reputations ahead of the anticipated selloff.

GSK is looking to sell more than just drugs. Walmsley has also overseen a strategic review of GSK’s rare disease unit. With that completed, GSK is now considering “options for future ownership of these assets.” The unit is notably absent from the list of four fields in which GSK is focusing its R&D investment.

Other aspects of the revised strategy include a focus on improving connections between the R&D and commercial teams and “governance around pipeline decision-making.” The focus appears to acknowledge previous weaknesses in how GSK has made pipeline decisions and transitioned drugs from the clinic to the market.

Walmsley’s planned overhaul of the pharmaceuticals unit acknowledges the subpar performance of the group. That performance has led to pressure to break up the company from investors such as Neil Woodford. In the face of this pressure, GSK has reaffirmed its commitment to keeping the pharmaceuticals, vaccines and consumer healthcare groups together.

Instead of breaking up the company, Walmsley has followed Eli Lilly’s similarly-new CEO Dave Ricks in trying to cut the fat from the pipeline to focus investment on a smaller number of top prospects. That is expected to contribute to $1 billion in cost savings by 2020. But given the history of Big Pharma companies dropping drugs that go on to succeed elsewhere, could also lead to successes for opportunistic biotechs and heartache for GSK down the line.