Bucking biopharma’s trend in 2014, GlaxoSmithKline CEO Andrew Witty swapped off his oncology assets to Novartis, building his company’s position in vaccines and consumer healthcare instead.
Fast-forward to the future. After taking flak from prominent investors, Witty continues to defend the logic—and in recent quarters, he's had the numbers to back up that contention. He continues to make the case that high-priced treatments don't make business sense in the long run.
Consider immuno-oncology. Speaking Tuesday at the opening of GSK’s Rockville, Maryland, vaccine research site, Witty said that he doesn’t see pricey immunotherapies for cancer, now biopharma’s hottest field, as a “cost-effective … global healthcare solution.”
To back up his point, Witty said the number of patients treated by the last 20 top-selling pharma products has dropped “catastrophically” in recent decades.
“A blockbuster drug of the '80s probably treated tens or hundreds of millions. In the '90s it was tens of millions, and now you are into tens of thousands," he said. "Vaccines are going the other way.”
Witty said believes the returns to shareholders are “very similar” for vaccines and pharmaceuticals. What’s different is the shape of the return curves.
“The pharmaceutical business tends to be a lot of go, go and then some stop,” the CEO said. “You have a lot of excitement when a new product is out, but it doesn’t last all that long typically. And with biosimilars, the era of believing that you can turn pharmaceuticals into super-long annuity business I think is becoming rightly unlikely.”
With vaccines, a business with high barriers to entry driven by volume on a lower price point, companies can eke out similar profits, the CEO said.
“I think the most sophisticated investor understands that,” he added, later cautioning that pharma is a valuable sector and one in which GSK intends to remain.
By focusing on vaccines and consumer healthcare, Witty bet GSK’s future on lower-margin businesses in a move that so far seems to have paid off. Pricing pressure has taken a toll on the pharmaceutical industry, and GSK’s vaccines have outperformed other units in the second and third quarters this year.
GSK opened its Rockville R&D site on Tuesday, touting the facility as one where researchers can address emerging health threats and conduct commercial vaccine research.
Witty previously announced he’d step aside next March, clearing the way for Emma Walmsley to take the post.