GSK CEO Witty's pay whacked as U.K.'s largest drugmaker struggles to right itself

Andrew Witty

2014 was a tough year for GlaxoSmithKline ($GSK). Its revenues and profits were off significantly. Its operating profit was off nearly 50% in pounds--and, as it turns out, so was CEO Andrew Witty's pay. In fact he took a 46% whack to his compensation.

According to the drugmaker's annual report, Witty's total compensation was about £3.9 million, down from £7.2 million last year. His salary was up slightly but his bonus was cut 51% to £917,000 ($1.4 million from $2.9 million), the report shows.

"The vast majority of the chief executive officer's remuneration is based on meeting stretching performance targets," Glaxo spokesman Simon Steel told Bloomberg in an email. "The board recognized the challenging year the group has faced but it also recognized the good progress management has made."

Nicholas Turner, an analyst with Mirabaud Securities in London, phrased it more bluntly. "You could read it as a message from the board that he's underperforming," he told Bloomberg.

Much of the problem was the hit that its top-selling drug, asthma treatment Advair, took in the U.S., down 10% last year as Express Scripts ($ESRX) and CVS ($CVS) cut it from their formularies. That left patients to pay out of pocket for the product or switch to an approved alternative, and the numbers show many did the latter. Both pharmacy benefits managers have returned Advair to their lists for this year but only after GSK offered up enough in discounts to suit them.

As unpleasant as a big cut in pay may be, Witty at least kept his job while others did not. Earlier this month, U.S. chief Deirdre Connelly exited. Today, it was announced that Chairman Christopher Gent will leave in May instead of September as originally planned. He is being replaced by Sir Philip Hampton, who is now chairman of the Royal Bank of Scotland.

The pain has been felt deeply in the trenches as well. In October, GSK announced it would slice out $1.6 billion in costs to deal with the Advair weakness and two months later said it would ax 900 jobs in North Carolina, both in R&D and commercial operations.

The heat will remain on Witty this year, but the company's performance will be tricky to track as it completes deals to sell its oncology business to Novartis ($NVS), take over the Swiss drugmaker's vaccine unit and start up a joint venture in consumer health. Still, Witty says prospects for the company are improving as its new respiratory meds have started to pick up market share in the U.S.

- find the GSK annual report here
- get more from Bloomberg

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