GSK’s New CEO Emma Walmsley Has a Strong Start Out of the Gate

Under the previous boss, Sir Andrew Witty, GSK earned plaudits for focusing on bringing essential medicines to developing and underserved markets around the world and for mostly avoiding—shall we say—ambitious price hikes, a practice that has stained much of the pharma industry over the past decade. The strategy of aiming for high global volume (largely with lower-margin meds and vaccines) rather than pushing for sky-high prices in a handful of select drugs earned GSK the No. 1 spot on Fortune’s 2016 “Change the World” list. But that approach also contributed to the grumbling among the company’s growth-minded shareholders. Some investors, along with Wall Street analysts, sniped that GSK’s drug pipeline was weaker than it should be and that the company was leaving money on the table.

That’s not to say that, under Witty, GSK’s stock exactly languished. During his tenure from May 2008 through the end of March 2017, GSK shares returned 135% when measured in British pounds, nearly doubling the FTSE 100 index and handily beating the S&P 500. That works out to a 10.1% annualized return. Not too shabby a run.

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Harder hit were the company’s U.S. shareholders: When translated to American greenbacks, GSK stock didn’t fare nearly as well, returning just over 50%, or less than half of the S&P’s showing during the period. And that performance (in both pounds and bucks) suffered notably in the latter half of Witty’s stretch, as investors fled to other faster-growing pharma players.

So far, Wall Street has been very pleased with Walmsley, who formerly headed GSK’s consumer care unit—and who, before joining GSK, had a long, productive run at L’Oreal. GSK stock is up 15% year to date (in local currency).

Three quick takeaways from our conversation:

First, Walmsley has a keen and seemingly intuitive sense of what her job is.

“I don’t think anyone can fully explain how to prepare you for what it’s like to be a CEO until you’re actually on the job,” she says. “It’s certainly a very different job than leading a division. But the way I define the job is, firstly, in setting strategy for the company and leading the allocation of capital to that strategy—because until you put the money where you say your strategy is, it’s not your strategy. Next is appointing the very best people in the world you can to execute that strategy. Third is defining and modeling the culture, whether it’s through your own behavior or through the people you appoint or through the actions you take. And then, finally, managing risk—whether that be, fundamentally, company reputation, operational risk, or strategic risk. So those are things that I think matter in this job, and arguably when you are, as with me—what one might describe as a surprise appointment or at least an ‘insider outsider’—the most important job is the people that you appoint. That is absolutely the sine qua non.”

Second, she is rebuilding GSK from the top down.

Walmsley has replaced “a bit more” than 50 top executives at the company or more than 40% of her key reports—though 70% of those new appointments, she points out, were with internal candidates. One important outside figure she has brought in is Dr. Hal Barron, who had overseen drug development at Roche (including its high-profile Genentech arm) and later did a short stint at the Alphabet-funded Calico. After talking with Walmsley for an hour, it seems clear that Barron is going to have a free hand over R&D for a while—particularly in oncology. (Under Witty, GSK undertook a $20 billion asset swap with Novartis, grabbing the latter’s vaccine business as it gave up the bulk of its cancer drug portfolio in return.)

Third, GSK’s new boss has stars in her eyes when it comes to cancer drugs.

Oncology isn’t the only area of renewed focus under Walmsley, but clearly it’s an important one. In this space, look for a much bigger push into cell and gene therapy as well as in immunology—a place where the world’s largest vaccine maker believes it might have an experiential edge. GSK, meanwhile, is likely to continue building its bulwark in respiratory and HIV medicines.

Says Walmsley: “The most important changes that I wanted to make were, firstly, to focus again primarily on pharma, our biggest business, where we allocate the most capital—and which has the highest risk, highest return. And at the heart of that is R&D. Because I believe that is why a company like GSK should exist, and hopefully should endure, because we discover and develop medicines that make a meaningful difference. And vaccines and consumer products too. But I think over the last decade, we did an amazing job of building up with the team the two other businesses [vaccines and consumer products] and I wanted to get back to our R&D, and to our mojo around science and discovery and development again.”

Two drug candidates where Walmsley clearly sees some of that early mojo are in the oncology area, notably. The first is a combination investigational antibody and drug that targets a protein called B-cell maturation antigen, or BCMA. (BCMA is expressed exclusively, it is thought, on a type of white blood cell called the plasma cell—abnormal versions of which are at the heart of multiple myeloma—and there are hopes that antibodies to this antigen can be adapted as an effective anticancer agent.) After a promising early-phase trial, GSK’s BCMA drug candidate got a “Breakthrough Therapy” nod from the FDA in November, a regulatory designation intended to speed up the development and review process.

The second buzz-worthy candidate is a T cell therapy that GSK licensed from Adaptimmune and now has in more than half a dozen clinical studies. This one targets NY-ESO-1, a protein that is abundantly expressed by many types of cancer cells and which naturally elicits an immune response. GSK hopes that its NY-ESO therapy bet will be able to both ramp up and focus that natural immune response on a patient’s tumors.

“We do believe that the next wave of growth will also come from some specialty medicines,” Walmsley says. “It’s all early-stage stuff, so all the caveats apply,” she says. Of the 15 or so key drug products in development now—in both oncology and other areas—“the list will get shorter because data will show,” she says. Hal Barron, GSK’s drug-development czar, “will have a very high bar for the assets we want to take forward.”

Walmsley insists she isn’t in the market for more “me-too” drugs.

In the end, she says, “it doesn’t need to be a long list [of medicines], it needs to be a list of things that are going to make a difference. And the data will decide that.”