GlaxoSmithKline has just named Emma Walmsley as the new CEO, to replace Andrew Witty when he retires next year. Walmsley, of course, is the company’s present consumer healthcare division CEO, but within only a matter of months she will become the first woman to take the reins over the whole company.
In response to the news, she said: “I am delighted and honored to be appointed GSK’s next CEO. GSK (NYSE: GSK) is a company that leads both in science and in the way it does business. We have momentum in the group and as the demand for medical innovation and trusted healthcare products continues to rise, we have the opportunity and the potential to create meaningful benefits for patients, consumers, and our shareholders.”
Also in response, GSK chairman Philip Hampton explains: “Emma is an oustanding leader with highly valuable experience of building and running major global businesses and a strong track record of delivering growth and driving performance in healthcare.”
You may recall that Witty hand picked Walmsley to manage the consumer health care arm as part of his plan to diversify the business, putting pharmaceuticals on one side and consumer healthcare products on the other side. While shareholders have criticized this model, Witty defends that this attempts to make things a bit more predictable. By putting steady income streams on one side, for example, it helps to offset the less stable division of drug discovery.
And in the face of criticism, Glaxo’s structure has, in fact, proven beneficial for the company, with shareholders actually receiving steady dividends.
Polar Capital investment management partner Dan Mahoney explains that “Glaxo is focused on slow, predictable cashflows. That might be boring, but boring is not bad right now. You can’t get interest from banks or gilts, so as long as that dividend is covered and there is modest growth, it remains an interesting investment.”
The appointment of Walmsley, though, is a more certain signal that the company has no plans of breaking up into smaller pieces. The hope, of course, is that holding strong, the company can face the industry-wide challenge of efficiently proving drug efficacy in order to quickly—and safely—distribute them during time when hospitals, insurers, and consumers alike all have tighter budgets.