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 Witty, a 31-year company veteran, has been under fire from some
investors in the past three years as sales and profits have flagged,
while some have questioned his focus on a consumer health business
that ranges from headache pills to toothpaste.
His reputation was further tarnished by a damaging bribery scandal
in China that landed GSK with a record 3 billion yuan ($463 million)
fine in 2014.
On the plus side, Witty has managed GSK through a wave of drug
patent expiries without resorting to a major acquisition and the
company is now on track to return to earnings growth this year.
His decision to retire at the end of March 2017 is not a huge
surprise, since Chairman Philip Hampton had already discussed the
need for succession planning in meetings with some shareholders.
But the departure comes at a time of continued debate over the
direction of GSK and investors may fear a period of limbo before a
new CEO comes on board.
There have been calls from a minority of shareholders, including
respected UK fund manager Neil Woodford, for a break-up of the
group, with critics arguing its pharmaceuticals and consumer health
units would do better as standalone businesses.
Witty, 51, has conceded in the past that spinning off the consumer
healthcare division could be an option but he has argued this should
not happen in the short term.
Deutsche Bank analyst Richard Parkes said that while a new CEO might
turn to acquisitions to bolster GSK's prescription drugs - a move
that could be funded by a sale or spin out of consumer operations -
an evolution of the current strategy was more likely than major
change.
A $20 billion asset swap with Novartis, completed a year ago, which
involved the exchange of cancer drugs for the Swiss group’s consumer
health products and vaccines, was a centre-piece of Witty's time in
charge.
The deal crystallized his idea of reducing exposure to
premium-priced pharmaceuticals and increasing sales of
over-the-counter products, as well as selling more lower-priced
medicines in emerging markets.
STOCK UNDERPERFORMANCE
Not all investors have been convinced by the diversification play,
however, and GSK shares have underperformed, returning an average 10
percent annually in the last five years against 14 percent on
average for the European pharmaceuticals sector.
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Recently, GSK stock has done better, largely on the back of its HIV
drug business, which the company had considered spinning off in an
initial public offering before deciding to retain it.
In explaining the decision to announce his retirement a year ahead
of departure, Witty said it was important the board had sufficient
time to conduct the search for his replacement.
"By doing so we will strongly position GSK to achieve the
medium-term outlook set out to investors last year and deliver a
return to core earnings growth in 2016," Witty said.
GSK said its board would consider both internal and external
candidates for the role of new CEO. Executive search firms Egon
Zehnder and Korn Ferry have been engaged to help with the
appointment.
Internal candidates could include GSK's global pharmaceuticals head
Abbas Hussain, leader of the consumer division Emma Walmsley and
manufacturing head Roger Connor, as well as finance chief Simon
Dingemans, a former Goldman Sachs banker.
Externally, GSK might try to snare a senior figure from a rival
drugmaker, such as Novartis' respected pharma head David Epstein, or
else look beyond the drugs sector to an executive with broader
experience in consumer products.
Chairman Hampton also announced plans for "board refreshment" at the
drugmaker, with Deryck Maughan, Stephanie Burns, Daniel Podolsky and
Hans Wijers not standing for re-election at the annual meeting in
May.
(Additional reporting by Sarah Young; Editing by Kate Holton and
Mark Potter)
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