Glaxo's Connelly bows out amid scramble to turn around U.S. business

Deirdre Connelly

GlaxoSmithKline's ($GSK) sputtering U.S. sales gave the company a black eye with investors. Now, the company's U.S. chief is stepping down. Deirdre Connelly is out the door, the company told employees on Tuesday, with SVP Jack Bailey rising to take her place.

As Bloomberg reports, the 54-year-old Connelly will retire after 6 years as North American president, and Bailey will take over her post immediately.

Last fall, after GSK surprised the market with slumping Advair sales in the U.S., disappointed institutional investors were said to be pressing GSK for management changes. Some demanded change at the very top--CEO Andrew Witty or Chairman Christopher Gent, on the verge of retirement already. But other U.K. market-watchers pegged Connelly as a potential sacrificial lamb.

Gent has since announced his retirement, with Royal Bank of Scotland chair Philip Hampton stepping in to take his place in September. But the U.S. operations are still struggling, thanks to payers pressing for big price breaks on Advair in return for placement on their formularies. For instance, to regain a spot on Express Scripts' ($ESRX) national formulary, which excluded Advair in 2014 in favor of AstraZeneca's ($AZN) Symbicort, GSK was forced to discount the drug.

Meanwhile, GSK's newer respiratory meds have been slow to gain traction, and some blamed their poor initial performance on a new, quota-free sales-and-marketing structure Connelly implemented in 2011. Connelly had good reason for the change: It was an effort to clean up the company's image, tarnished by a record-setting marketing settlement with the U.S. Justice Department. And Witty backed the shift by rolling it out worldwide last year.

But things have changed in the U.S. since then. Advair sales slipped by almost one-quarter for the first 9 months of 2014, and by October of last year, GSK was saying it would cut $1.6 billion in costs to deal with the slide. In December the company said it would ax 900 jobs in North Carolina, both in R&D and commercial operations. Overall, U.S. sales dropped by 10% last year.

"The U.S. marketplace has changed significantly, with an exceedingly competitive payer landscape," said Abbas Hussain, GSK's global pharma chief, in a note to employees (as quoted by Bloomberg). "As a result the entire sector is facing new challenges due to pressures on price and access."

GSK CEO Andrew Witty

Witty recruited Connelly from Eli Lilly & Co. ($LLY) in 2009, soon after he took the helm at GSK. At the time, she reported directly to him. But as Bloomberg notes, Connelly slipped down a notch in a management rejig last year, when Hussain, who had been in charge of emerging markets, took over as head of global pharmaceuticals. After that, Connelly reported to Hussain instead.

The latest change in the U.S. comes as GSK is preparing for an enormous shift in focus. The company agreed last April to sell its oncology business to Novartis ($NVS), and bought Novartis' vaccines unit in return. The two companies set up a consumer health joint venture, under GSK's brand name and management. Meanwhile, the new respiratory meds have started to snare market share in the U.S., Witty says. It will be up to Bailey, apparently, to make sure that continues.

- read the Bloomberg story

Special Reports: The 10 best-selling drugs of 2013 - Advair | Top 10 pharma companies by 2013 revenue - GSK

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