GSK break-up? Don't bank on it, says drugmaker's outgoing boss

By Ben Hirschler

LONDON (Reuters) - News that GlaxoSmithKline will have a new chief executive in 12 months has fueled speculation about a break-up of Britain's biggest drugmaker but outgoing boss Andrew Witty says this is wide of the mark.

Witty, 51, insisted his decision to retire in March 2017, announced on Thursday, was unrelated to calls from some investors for GSK to be split up, adding that the board was united in backing the current structure.

"Absolutely, you should not make that linkage," he told Reuters in a telephone interview. "I can tell you the board is unanimously committed to the strategy and the structure of the group."

Witty, a 31-year company veteran, is stepping down after leading the drugmaker since 2008.

Under his leadership, GSK has become more diversified, to the frustration of some investors who see little merit in combining consumer health products such as headache pills and toothpaste with higher-margin pharmaceuticals and vaccines.

The $9 billion-a-year consumer business has been expanded significantly following a complex asset swap with Novartis, which closed last year, and it now accounts for a quarter of group turnover.

The broadening of GSK's base comes at a time when the rest of the pharmaceutical industry has been seeking greater focus and critics, including top-10 shareholder Neil Woodford, argue GSK would do better by following suit and spinning off the consumer products business.

"There's a head of steam building up for the divestment of the consumer business," said Mick Cooper, an analyst at equity research firm Trinity Delta.

"It now has the mass and the reach to be a standalone group, and there are next to no synergies with the rest of the pharmaceutical business."

THE RIGHT THING

Others, however, support what Witty has done and like the way steady consumer product sales offset volatile pharmaceuticals, where clinical trial upsets, patent fights and reimbursement arguments can derail expectations.

Witty also argues the market for expensive new medicines is more challenging than ever, boosting the case for selling over-the-counter products while simultaneously seeking innovative breakthroughs in prescription drugs and vaccines.

"The environment is playing out the way we anticipated with a tougher and tougher space around pricing," he said. "As recently as yesterday the board reiterated again unanimously the view that we are doing the right thing."

Debate over the structure of GSK and changing views about what constitutes its core business have been a feature throughout Witty's time at the head of the drugmaker.

Back in 2008, he was enthusiastic about the full range of the company's consumer portfolio, including the drinks brands Lucozade and Ribena, which were sold off to Suntory Beverage & Food in 2013.

Last year, meanwhile, GSK decided not to spin off its ViiV Healthcare HIV medicine business, having previously said it was considering an initial public offering.

Witty said he did not have firm plans for life after GSK but would probably remain in healthcare.

"I did a deal with myself that I wouldn't start thinking about that until much nearer the time that I actually leave the company because I don't want to dilute my energies for GSK this year," he said.

"I will probably do something in the healthcare arena in some regard but I haven't thought that through."

(Editing by David Clarke)