It's official: GlaxoSmithKline ($GSK) CEO Andrew Witty is moving on. At the helm of the U.K.-based drugmaker since 2008, Witty will step down in March 2017, clearing the way for a new captain to chart a new course.
Witty's departure has been rumored for months as investors pressed the company for a shakeup. Upset by sliding sales of major products and less-than-impressive growth from new launches, shareholders are agitating for drastic measures, from an executive shakeup to a four-way breakup of the company. Last month, GSK reportedly asked its executive search firm to work up a short list of candidates to replace Witty.
Despite the pressure, Witty isn't in a huge rush to leave and GSK isn't interested in throwing him out the door. They want an orderly transfer of power.
"I believe this will be the right time for a new leader to take over," Witty said in a statement about his departure. "In making this decision it has been important to me that the board has the time to conduct a full and proper process."
The CEO search will look at internal candidates such as CFO Simon Dingemans, but also outsiders, with some market-watchers suggesting Novartis' ($NVS) pharma chief, David Epstein, as a potential choice.
Though investors started rumbling back in 2014 after a $489 million bribery penalty in China, it was Advair's implosion that really turned up the heat on Witty. The company's biggest-selling product, Advair plummeted over the past 18 months as copycats and head-to-head brand competition siphoned off market share, and GSK turned to deep discounts to cut deals with payers.
The fact that new respiratory launches, including Anoro and Breo, didn't go as well as hoped didn't help. His attempts to polish GSK's image--tarnished by the China bribery scandal, as well as a $3 billion marketing settlement in the U.S.--drew fire, with some critics blaming his sales reforms for the new products' slow start.
Witty has made some big moves to ease the pain: A little more than a year ago, after Advair took its first big dive, the company announced $1.6 billion in cost cuts, and last year GSK closed its multibillion-dollar sale-and-swap with Novartis, gaining most of the Swiss drugmaker's vaccines unit and a lead role in a new consumer health joint venture, in return for its oncology business. And he set forth a new long-term growth strategy more dependent on reliable, lower-margin products such as vaccines and consumer drugs, and less so on high-risk pharma.
That slow-and-steady approach didn't delight investors. Still, even as uber-investor Neil Woodford campaigned for a four-way breakup of the company--and others demanded a new CEO--Witty has defended the approach, and GSK's other changes, urging shareholders to give them time to work before turning to radical alternatives.
Now that Witty's departure date is set, Woodford and others have turned their attention to the incoming chief--and Woodford, for one, is set against promoting from within. "I have a strong preference for an external candidate," Woodford said on SkyNews Thursday morning, because GSK needs "a fresh pair of eyes."
Investors looking for quick structural change might be disappointed, however. Not everyone is sold on a wholesale breakup, and hiving off consumer health, as some have suggested, wouldn't be a quick-and-easy fix, either, analysts say. Without consumer health, GSK would be more dependent than ever on its lagging pharma business, Deutsche Bank analysts said, unless GSK pulled off a "transformational deal" to beef up its prescription drugs business first.
"It seems to us more likely that any new strategy will represent an evolution on the company's current direction rather than a major change," they said.
- read the GSK release
- see the SkyNews coverage
- read The Telegraph's story