What to make of Sir Andrew Witty? The answer 18 months ago would have been straightforward.
The Glaxo Smith Kline boss had barely survived a bribery scandal in China and had presided over a malaise at Britain’s biggest drug developer. Glaxo’s share price was in the doldrums, as was the chief executive’s reputation. Some even whispered the treasured dividend was under threat.
How times change. Witty will unveil Glaxo’s results on Wednesday, his last official act before retiring after nine years in charge. He leaves the company he joined in 1985 in good health.
The share price recovered from a nadir of £12.80 in late 2015 to close on Friday at £15.47 — nearly 40% higher than when he took the top job. Sales are forecast to have risen 15.9% to £27.7bn last year, with profits also up. The dividend is expected to yield a whopping 6.5%.
It is an impressive turnaround based on a controversial strategy. The prevailing wisdom among big pharma bosses is that success lies in developing high-priced medicines for rare diseases, yet Witty has staked Glaxo’s future on selling cheap drugs in huge volumes in emerging markets.
It was derided at first but, when a Donald Trump tweet on drug pricing can cause healthcare stocks to plunge, it now looks smart. Add to that a rock-solid consumer division, which sells staples such as Sensodyne toothpaste and Panadol painkillers, and Glaxo looks a stable bet in a volatile world. Analysts at Berenberg bank see profits rising steadily for the next three years, despite fears that revenue from Advair, Glaxo’s best-selling asthma drug, will be hammered by generic rivals.
Witty has put Glaxo on a steady footing but his departure leaves a big question. New chief Emma Walmsley has run the company’s consumer business for six years but has no experience in the painstaking process of developing new drugs.
Some investors are known to be wary. Backing the new boss is undoubtedly a leap of faith but one worth taking. Buy.
