GlaxoSmithKline ($GSK) is casting about for a new CEO. Amid shareholder pressure for a breakup or shake-up or both, the company reportedly has asked its headhunting firm to put together a short list of candidates to replace current chief Andrew Witty.
Sir Philip Hampton, who took over as chairman 18 months ago, has been talking with top shareholders about the change, according to the Financial Times and Reuters, which cited unnamed sources.
But Witty's departure may not be as imminent as it sounds; according to the FT, he's not expected to leave the company till next year at least. He'll also be involved in the search for his replacement.
|GSK CFO Simon Dingemans|
The list of potential internal replacements includes CFO Simon Dingemans, pharma chief Abbas Hussain, consumer health head Emma Walmsley and manufacturing chief Roger Connor. But investors unhappy with GSK's current course may push for new blood in the executive suite; the Sunday Times named Novartis pharma chief David Epstein as a possible contender.
The CEO news comes amid a wholesale debate over GSK's future. Some top investors, including the U.K.'s high-profile fund manager Neil Woodford, have been pushing the company to split up into several, thinking that GSK's businesses would be worth more to shareholders on their own. But shareholders--and top GSK execs--disagree; they believe the company's various businesses work better together.
|GSK consumer health head Emma Walmsley|
Witty himself has said that GSK's consumer business, a joint venture with Novartis ($NVS) created last year in their big asset sale-and-swap, could be a standalone unit. But he also maintains that GSK needs to work through the Novartis integrations before moving toward a consumer health split.
Amid all this breakup debate, some investors have been urging GSK to replace Witty. Last month, a U.S. hedge fund, Och-Ziff Capital Management ($OZM), not only took issue with the company's direction, but urged Hampton to clean house. An Och-Ziff source went so far as to say that it's a matter of "when, not if" Witty leaves the CEO job.
At the time, a source close to Och-Ziff told The Sunday Times that the fund wants "a plan in place by the end of the second quarter so we can see a road map."
There's good reason why investors are restless: GSK has suffered a series of blows to its reputation and its income statement. Over the past three years, the company has agreed to pay $3 billion to settle a variety of marketing and manufacturing allegations from the U.S. Department of Justice and almost $500 million to wrap up a bribery scandal in China. Witty's work to rebuild GSK's reputation included an overhaul of sales-rep compensation that some blame for the slow launch of respiratory drugs the company needs to replace the aging--and ailing--Advair. That behemoth drug, long GSK's top seller, has seen sales slump dramatically since last year on generic competition and tough negotiations with U.S. payers.
But last month, in announcing GSK's fourth-quarter results, Witty pointed to growing sales of new products--which hit £2 billion--as evidence that the company is moving toward a prosperous post-Advair future. And he once again touted the company's current strategy of lower-priced, higher-volume sales, with reliable vaccines and consumer health sales helping to buoy the more volatile pharma business. "We are in a win-win scenario," Witty said at the time. "It makes a lot of sense for these businesses to be together."
That may be, and Woodford's insistent calls for a breakup may not be heeded. But it looks as if Witty won't be around to witness firsthand when and if his slow-but-steady strategy pays off.
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