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Monday, 2 April 2012

GSK Andrew Witty - decided to settle long-standing litigation against the company - but not FIDDAMAN

When Andrew Witty moved the chief executive's suite down to the ground floor at GlaxoSmithKline's GSK -0.11%global headquarters four years ago, the company's new CEO served notice that his tenure running Britain's biggest drug maker would be one of change—lots of it.

"I wanted to be visible and accessible so that people could bounce ideas off me, raise issues with me, and trying to minimize the inhibitions to doing that," says Mr. Witty. "Secondly, it is extremely helpful for me to have a feel of how things are going. It just allows me to interact with more of the organization, and, of course, the beauty of that is I interact with people at every single level of the business, not just the senior directors."

Andrew Witty says Glaxo in recent years needed to adapt to a changing world where 'blockbuster' drugs were becoming rare.

.Mr. Witty immediately moved to address the issues he saw as needing urgent attention, launching a painful restructuring program and in the process cutting costs and unnecessary infrastructure, diversifying the company's product mix and jettisoning noncore activities.

He also decided to settle long-standing litigation against the company, notably in the U.S., paying massive legal charges tied to consumer lawsuits over diabetes drug Avandia, once the company's second-largest selling medicine, and a variety of other legal disputes involving its antidepressant Paxil.

"When I took over we had a series of substantial open litigation running against the company, for all sorts of different reasons, from the past, and I took a view that early resolution … was in the best interests of everybody concerned," Mr. Witty says. "I would much rather we were focused on developing our business, and focused on making sure we minimize future liabilities, than everybody spending their entire time looking backwards at things that happened 10 years ago."

GSK was formed in 2000 by the merger of GlaxoWellcome PLC and SmithKline Beecham PLC, creating the world's biggest drug maker at the time. Today, GlaxoSmithKline's pharmaceuticals arm develops, makes and markets drugs and vaccines, while its consumer-health division comprises oral care, over-the-counter medicines and nutritional healthcare and includes brands like pain-killer Panadol, Aquafresh toothpaste and the Lucozade energy drink.

Mr. Witty says Glaxo needed to adapt and respond to a changing world where "blockbuster" drugs generating more than $1 billion a year in sales were becoming rare and purchasers more reluctant to buy expensive medicines. The days of top-heavy, sprawling drug companies were numbered.

And the changes Mr. Witty has overseen at Glaxo have borne fruit. Britain's largest drug maker by sales and market capitalization is emerging from its "patent cliff" of drug patent expiries and expects to return to sales and margin growth this year, driven by Mr. Witty's diversification push, new products and expansion in emerging markets.

Analysts view it as one of the pharma sector's best investment prospects. "GlaxoSmithKline is one of the best-run companies in the sector, will deliver top-line growth and operational leverage and its overall risk profile is good compared to peers," was how Redburn analysts summed up the company in a recent note.

That resurgence under Mr. Witty allowed Glaxo last month to say it would invest more than £500 million, or about $800 million, and create as many as 1,000 manufacturing jobs in the U.K. at a new facility—the first new Glaxo manufacturing plant to be built in its home country in almost 40 years.

"It really takes me back to the two key things I want us to deliver: great sustainable innovation in health care, and access to medicines," Mr. Witty says.

"There are two things I want this company to be: one is a company that is able to do those two things, and once and for all demonstrate that you can do both things at once, and I think we have made progress on that.

"The second is that I want us to be the company that organically reinvents itself from the era of the 1990s pharmaceutical industry into whatever a vibrant pharmaceutical company will look like in the next 10 or 20 years. That is why I have been so adamant that we will not do large-scale M&A, because I want us to do this the hard way. I want us to reinvent ourselves from the inside out because I truly believe the company is capable of doing that."

The 47-year-old Mr. Witty says many of the changes he has introduced to Glaxo need to be embraced by the pharmaceuticals industry as a whole, for its own good and for the good of society. And, he says, those two objectives aren't mutually exclusive.

"I have made no secret of the fact that the industry and companies like GSK needed to work differently," he says. "My view was that the industry needed to do a lot to meet society, if you will, or its critics, at least halfway, and so that is what drives the internal change agenda at Glaxo—hence my focus on improving productivity of R&D, my focus on improving access to medicine in Africa and elsewhere, driving flexible pricing approaches in countries where that had not been seen before. Those are all dimensions of trying to change the behavior of the company."

Mr. Witty, who has been with Glaxo since 1985, is also president of the European Federation of Pharmaceutical Industries and Associations, a position he has held for two years.

In this dual capacity, Mr. Witty played a key role in coordinating and recently launching the Bill and Melinda Gates Foundation's eight-year program to fight tropical diseases. The initiative, announced in London at the end of January, recruited 13 major pharmaceutical companies to the project—a push to eliminate or control by 2020 10 tropical diseases that affect more than a billion people in poor countries. The promise commits pharma companies to pooling intellectual property to find the medicines to fight the diseases.

Mr. Witty is very proud of the pact and says it goes to the core of what he has been striving for since becoming Glaxo CEO in 2008. "What you have seen over the last four years is the roll-out of all of that thinking, where we said 'What can we do on intellectual property, this great bastion that could never be varied?'—but actually, of course, it can be varied, because we can have different approaches to IP, depending on different types of market situation."

The next area in which Mr. Witty is hoping to see R&D pooled is in developing new antibiotics to fight the rapidly evolving drug-resistance among microbes responsible for common infections, which threatens to turn them into untreatable diseases. The first line of defense against many infections, antibiotics take around 10-20 years to develop, and there are few in the pipeline. Only two new classes of antibiotics have been developed and launched in the past 30 years, and experts are worried that only a few big drug firms still have strong antibiotic R&D programs.

Last fall, the European Commission set out plans to boost research in antibiotics by helping small drug firms and promoting collaborative R&D between larger companies.

"We are trying to get ahead of the disaster.… Everybody has a concern that, one day, there might be a bug for which we don't have a drug," Mr. Witty says. "We don't want that day to happen, and we need to re-double our energies, and the way to do that is to acknowledge that the market has failed in this regard."

In the little free time he has, Mr. Witty tries to switch off by riding with his family. "When you are a CEO you think about the business every single waking second of your life," he says. "I wake up in the morning, GlaxoSmithKline; I go to bed at night, GlaxoSmithKline. It just is what comes with the job, so what the horse-riding does for me is just to force me to focus on something other."

Andrew Witty

Age: 47

Nationality: British

Position: CEO, GlaxoSmithKline

Based: Brentford, England

Time in job: Four years

Previous positions:

Jan. 2003-May 2008: president, GSK Pharmaceuticals Europe; 1985: Joined Glaxo. Held senior positions in Asia Pacific, South Africa, U.S.

Write to Sten Stovall at

Andrew Witty

Age: 47

Nationality: British

Position: CEO, GlaxoSmithKline

Based: Brentford, England

Time in job: Four years

Previous positions: Jan. 2003-May 2008:

president, GSK Pharmaceuticals Europe;

1985: Joined Glaxo. Held senior positions

in Asia Pacific, South Africa, U.S.

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