Witty builds case for why 2016 is GSK's pivotal year

GSK CEO Andrew Witty

2016 is the year that GlaxoSmithKline ($GSK) is supposed to start to show the results of CEO Andrew Witty's turnaround efforts. Well 2016 is here and Witty is expected to show up at the JP Morgan Healthcare Conference next week with plans he hopes will convince investors that his efforts to remake the British pharma giant have not been in vain.

Some investors are counting on it. The Financial Times points out that analysts at Morgan Stanley last month said that after three years of downgrades "earnings should finally bottom out and grow double-digit in 2016."

Investors are telling the Financial Times Witty lay out in San Francisco his vision of a renewed GSK that will look to new respiratory drugs to replace revenue lost to generics and other pressures on asthma behemoth Advair, but also to gains from its HIV business, an operation it was prepared to spin off last year for cash only.

GSK changed course on its ViiV partnership when it turned out to be one of the bright spots in an otherwise patchy revenue picture. ViiV racked up £622 million ($927 million) in Q3 sales, to post a 67% year-over-year surge. Then last month, the U.K. company announced an agreement to buy up Bristol-Myers Squibb's ($BMY) pipeline of HIV meds, a deal that could end up tallying nearly $1.5 billion.

On the respiratory side, GSK is still looking for growing momentum for Breo and Anoro, which so far have come out of the gates very slowly. Respiratory sales continue to fall in Q3, off 9%. Breo Ellipta and Anoro Ellipta sales were £27 million and £14 million respectively in the quarter, much improved from the previous quarter, but not enough to prevent a 9% fall in overall respiratory drug sales.

GSK is hoping for better things this year from that part of its business, boosted in part by its new drug, Nucala, which treats a specific type of severe asthma. The drugmaker has already stirred up some controversy with it, by pricing it at $32,500, a figure it says is fair but an amount that one price watchdog groups has said is much too high.

Witty is also counting on its enlarged vaccines and consumer health businesses to provide additional support toward growing revenues. Investors, some of whom have gotten impatient with Witty, will be pay close attention next week to see if they they see something that indicates the CEO's projections are on the mark. One significant investor told the Financial Times that three years of poor performance from GSK have been vexing but, they want to give Witty the chance to prove he is right about his approach. "We think it is the wrong time to change the captain," the investor said.

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