February 28, 2016 4:07 pm
GlaxoSmithKline is gearing up to begin a formal search for its next chief executive as Sir Andrew Witty’s eight-year tenure enters its final stages.
Sir Philip Hampton, chairman, has already consulted large shareholders about the succession on an informal basis, according to people involved in the discussions, and it is understood that a more intensive process will take place in coming months.
Sir Andrew, one of the longest-serving chief executives among FTSE 100 companies, is not expected to depart before 2017 and he will be involved in the search for his successor.
The lengthy timetable shows how Sir Philip, who was elected chairman last year, has resisted pressure from some shareholders for a more immediate change of leadership in favour of an orderly transition.
Sir Andrew’s job has often looked in peril over the past three years as a sharp downturn in GSK’s sales and profits coincided with a damaging corruption scandal in China.
However, the outlook has improved in recent months, with earnings forecast to grow by a double-digit percentage this year. GSK is the only large European pharma group whose shares have risen in 2016 to date, although they remain down from three years ago.
Egon Zehnder, the blue-chip headhunter which already works on a retainer for GSK, will advise on the search.
GSK has declined to comment.
Internal candidates are likely to include Abbas Hussain, head of the mainstay pharmaceuticals business, and Emma Walmsley, who runs the consumer healthcare unit, which is responsible for brands such as Aquafresh toothpaste and Panadol painkillers.
Others likely to be considered include Simon Dingemans, chief financial officer and a former Goldman Sachs banker, and Roger Connor, head of global manufacturing and supply chains.
However, some investors want GSK to look at external candidates after the poor shareholder returns of recent years. These could include people such as David Epstein, head of pharmaceuticals at Novartis.
The process is expected to be more low-key than the race to succeed Jean-Pierre Garnier in 2007, when Sir Andrew was pitted against two other internal rivals, Chris Viehbacher and David Stout, in a high-profile contest.
Sir Andrew, who joined GSK as a trainee in 1985, will be hoping that a return to growth this year — fuelled by strong performance by the group’s HIV drugs unit — will allow him to depart with his reputation repaired from recent setbacks.
The looming change of leadership will again raise questions over the future shape of GSK as some shareholders, led by Neil Woodford, the UK fund manager, push for a break-up of its medicines-to-mouthwash business model.
Sir Andrew has argued that this diversified structure is the best way to deliver steady growth and hedge against the risks of drug development. But Mr Woodford believes a more focused approach would deliver higher returns.