* Walmsley takes over April 1 as generic Advair threat looms
* 2017 outlook likely to incorporate Advair risks
* Options for new CEO include deals and drug R&D choices
By Ben Hirschler
LONDON, Feb 6 (Reuters) - Emma Walmsley, GlaxoSmithKline's incoming CEO, will take over Britain's biggest drugmakerat a challenging time but the 47-year-old also inherits theflexibility to do deals and make key choices on new drugs.
Just four days before Walmsley moves into the top job onApril 1, U.S. regulators could approve the first substitutablegeneric version of GSK's inhaled lung drug Advair, which hasraked in more than a $1 billion in sales every year since 2001.
Walmsley is expected to formally present her strategicvision for the company in the summer.
Investors, however, will get an indication of how she viewsthe Advair threat on Wednesday, when GSK gives its 2017 outlookalongside full-year earnings. While Walmsley will not be on theresults call, she has been closely involved in the forecasts.
Navigating GSK through the loss of Advair, assuming U.S.generics are approved, is the biggest near-term challenge andwill demand a sharp focus on maintaining sales momentum forGSK's newer respiratory drugs Breo, Anoro, Incruse and Nucala.
Other hurdles to come include trying to improve GSK'srelatively weak pharma growth at a time when U.S. PresidentDonald Trump criticises high drug prices in its largest market.
It is arguably better placed than some to weather suchpressure, given its high-volume, lower-margin strategy set inplace by outgoing CEO Andrew Witty at a time when much of theindustry was focused on expensive drugs for rare diseases.
A solid consumer health business, led by Walmsley since2010, selling everything from painkillers to toothpaste, hasadded stability, while a weak pound has provided a windfall.
That has helped blow away fears about dividend payouts andhas increased the scope for acquisitions, with Goldman Sachsanalysts citing "pro-growth capital allocation" as a keystrategic option for Walmsley.
One big deal could come next year if Novartis optsto sell its minority stake in GSK's consumer business.
R&D DECISIONS
At the same time, there are important choices to be made inthe key pharmaceuticals division, which still accounts fornearly 70 percent of operating profits, despite the recentexpansion of vaccines and consumer health.
GSK expects to get important clinical trial results onaround 25 products in development over the next 18 to 24 months.
"The big value generator for the company is going to begetting a decent yield from that dataset and then makingexquisitely good decisions about prioritisation," Witty toldReuters in a recent interview.
With a background in shampoo and cosmetics, after 17 yearsat L'Oreal, Walmsley's expertise is far from the labbench, although she has taken a crash course in pharma R&D sinceSeptember, according to company insiders.
She needs to get up to speed as GSK heads into a period ofintensified R&D activity, which could see the drug pipelinebecome a more important part of its investment case.
Significantly, Walmsley's first senior appointment decisionas CEO-designate was to hire Luke Miels from AstraZeneca as head of pharmaceuticals, making him her key pharma lieutenantalongside GSK's research boss Patrick Vallance.
"She and Luke and Patrick are going to be opening theenvelopes together, making the choices and then living withthem. You'll have a team that is accountable right from theget-go," Witty said.
In the meantime, GSK's top priority is to continue themomentum of the core drugs business, which has enjoyed strongsales of HIV medicines but could soon face competition from anew Gilead drug.
Despite the imminent threat to Advair from cheap generics,Thomson Reuters data shows analysts expect GSK's earnings torise steadily over the next three years, leaving little room formissteps. (Editing by Alexander Smith)