Nearly a year into Novartis integration, GSK CEO won't discount vaccines spinoff

GSK CEO Andrew Witty

Since the completion of its massive asset swap with Novartis ($NVS), GlaxoSmithKline ($GSK) has been working to integrate the Swiss drugmaker's vaccines stall into its own operations. Now, at the J.P. Morgan Healthcare Conference, GSK CEO Andrew Witty cited "optionality" for the unit in the future, saying the drugmaker wouldn't discount a future spinoff.

In an interview with Bloomberg, Witty said there is still another "year or two" worth of integration efforts to be completed, but that the Novartis deal creates options for the company's leading vaccine unit and its consumer health joint venture. The company will consider any moves to increase shareholder value down the line, he added in speaking with CNBC.

Last March, GSK and Novartis completed their asset swap, in which the British pharma sent its oncology assets to Novartis and received the Swiss company's vaccines stall. Out of the gate, GSK struggled, with its vaccines profit falling 31% in Q1 2015 versus the same period in 2014. Operating margin fell 12.1% on the period, with 5.1 percentage points attributable to the Novartis vaccines pickup. However, by Q3 2015, things had improved, with profit jumping 30% during that period.

In a presentation on Tuesday at JPM, Witty said that upgrades to the company's supply network allowed it to accelerate its flu vaccine delivery in Q3 2015 versus the same period in 2014, boosting that business. In addition, in the first 9 months of last year, newly acquired meningitis vaccines provided extra help to the vaccines outfit.

Early last year, GSK laid out expectations for the vaccines integration, saying that it is targeting an operating profit margin of at least 30% for the unit by 2020. It added that it is expecting revenue to grow at an annual compound rate of mid- to high single digits between 2016 and 2020.

Much of the unit's burden for GSK is brought by flailing pharma revenue in the face of patent losses to respiratory behemoth Advair and skepticism over the company's decision to hive off its oncology assets. For his part, Witty has contended that betting on lower margin business such as vaccines and consumer health will position the company well in the ongoing drug-pricing debate.

- here's the Bloomberg story
- read more from CNBC
- and here's Witty's Tuesday presentation (PDF)

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