|GSK CEO Andrew Witty|
The decision of GlaxoSmithKline ($GSK) CEO Andrew Witty to double down on consumer health products has not been very popular with some investors, who question the strategy of focusing on low-margin, high-volume products like toothpaste. Well, Witty has a whole lot less toothpaste to sell right now, since GSK has recalled more than 3.9 million tubes that may have more than whitener in them.
GSK is recalling dozens of lots made up of different varieties of Biotene and Sensodyne toothpaste because they may have wood fragments in them, according to the FDA's most recent Enforcement Report. GSK is recalling the products from the U.S., Puerto Rico and Taiwan. The toothpaste was manufactured for GSK by Oratech, a Utah-based contractor.
In a letter to retailers posted by Smith Drugs, the U.K. company said it received some complaints from consumers after the products were shipped starting in June of 2013. The possibly tainted product was still shipped through April of this year. A GSK spokesperson said today that while there were no reports that anyone was injured from the tainted paste, the company voluntarily recalled it as a precautionary measure.
As part of their multibillion-dollar asset swap last year, GSK and Novartis ($NVS) agreed to combine their over-the-counter operations into one giant consumer health joint venture that GSK is now in charge of. Witty has said that he likes consumer health because it can avoid the kinds of pricing pressures seen by GSK blockbuster Advair, sales of which began sliding when pharmacy benefit groups started changing its formulary placement. Witty expected the consumer health group to achieve growth in the mid-single digits and sales of vaccines, another element of the swap, to add in mid-to-high single digits at a compound annual rate between 2016 and 2020.
But in the process, GSK hived off its oncology unit to Novartis, and its poor drug sales have led some investors to wonder if Witty can sell enough OTC products to make up the difference. "Putting your faith in over-the-counter goods like toothpaste is a gamble," one shareholder told the Financial Times recently. The whole matter has some watchers saying Witty's job could be on the line over last year's decisions. If the consumer and vaccine plays don't pay off fast, they think he could be out.