FOCUS-GlaxoSmithKline prescribes commercial reboot for pharma division

* GSK reallocating budget to key new drugs, top 10 markets

* Pharma head says commercial revamp matches R&D changes

* Cancer a big pipeline focus, promise lies from 2020

By Ben Hirschler

LONDON, March 21 (Reuters) - In January, GlaxoSmithKline'snew head of pharmaceuticals Luke Miels issued a bluntchallenge to his managers: find budget savings of 20 percent.

The plan was to pool the savings and reallocate the money topriority medicines and markets for Britain's biggest drugmaker,according to people familiar with the meeting.

The tough demand startled some GSK veterans who are used toa more consultative approach, said the sources. But it is a signof the harder commercial edge new Chief Executive Emma Walmsley- almost 12 months into the job - is bringing to a company whoseshares have moved sideways for years.

Miels - a long-time protege of AstraZeneca CEOPascal Soriot, whose departure sparked a legal spat between therival drugmakers - is a key lieutenant for Walmsley as she triesto overhaul the core pharma business.

The unit has lagged rivals like Novartis and Merck& Co in producing multibillion-dollar blockbusters, soWalmsley has prioritised plans to refocus both its research andmarketing efforts in a drive for fewer but bigger new drugs.

Miels declined to comment in detail on his budget demand,including the savings figure of 20 percent, but confirmed thestrategic goal of achieving a leaner, meaner commercialfootprint to match a recently pared-down research anddevelopment (R&D) operation.

The aim is to concentrate sales and marketing resources onnew products, particularly lung drug Trelegy and shinglesvaccine Shingrix, in 10 big markets - ranging from the UnitedStates, major European countries and Japan to China, India andRussia, he told Reuters.

"In R&D, we're trying to pick which assets are mostproductive and are going to add the most value to patients.Well, we need to do the same thing in the commercialorganisation," Miels said.

"That is something that will become more visible over timeand it is a process that we are going through now ... thestrategy is more advanced than is visible externally."

One early casualty is the reversal of previous expansion inAfrica.

GSK's track record for bringing new drugs to market hasactually been in the middle of its peer group since 2011,according to a recent Berenberg bank analysis, but itscommercial performance has disappointed.

UPHILL TASK AHEAD

Miels and his colleague Hal Barron - a long-time Rochescientist who joined in January as R&D head - know theyhave their work cut.

Even with a renewed sense of urgency, GSK's new drugpipeline will not deliver its next batch of products before 2020and, in the meantime, big challenges loom in two pivotalestablished disease areas.

A new drug from Gilead Sciences is set to dentGSK's HIV business, while U.S. generic competition to ageinglung drug Advair is coming.

Adding to uncertainty is the possibility that Walmsley - aconsumer products veteran who worked for 17 years at L'Oreal- might buy Pfizer's over-the-counter businessfor up to $20 billion. A deal may boost earnings but could provea financial stretch.

GSK shares have underperformed the European healthcaresector by 16 percent since she took over on April 1, 2017, whichhas not been lost on sceptics like high-profile fund managerNeil Woodford, who sold out of GSK in May.

REBUILDING CANCER

Walmsley announced plans last July to streamline pharma R&Dby ditching more than 30 drug projects.

Still, Miels said he had the resources needed to build upthe business in new focus areas like oncology and immunology,including potential funding for add-on biotech deals.

Significant cash is already being put to work, especially inthe company's cancer research labs.

Three years ago, GSK sold its established cancer medicinesto Novartis. But it retained some early-stage projects that itnow believes have the potential to leapfrog rivals and be at theforefront of treatment.

They include an antibody drug for multiple myeloma, whichcould be launched in 2020, as well as new kinds of immunotherapyand cell therapies designed to modify patients' immune cells.

In cell therapy alone, GSK has spent "hundreds of millionsof dollars" to build a large presence focused on T-cellreceptors (TCRs), according to oncology R&D head Axel Hoos.

Its presence may be largely below the radar but GSK'scommitment is on a par with better-known cell therapy companieslike Novartis, Gilead and Celgene, Hoos said in aninterview.

Unlike CAR-T cells that recognise proteins on the cellsurface, TCRs can find tumour-specific proteins on the inside ofcells and, significantly, they appear to be able to fight solidtumours, rather than just the blood cancers hit by CAR-Ttreatments like Novartis' Kymriah and Gilead's Yescarta.

Just last week, GSK's partner Adaptimmune reporteda second solid tumour response to TCR therapy.

The research is early and the cancer field is highlycompetitive but successful oncology drugs can deliver quickly,as rival AstraZeneca is starting to demonstrate. Consensusforecasts point to its 2018-22 annual earnings growth averaging15.3 percent compared with just 5.3 percent for GSK.

(Reporting by Ben Hirschler; Editing by Pravin Char)