GSK hunts for new CEO as Novartis asset swap starts to pay off

GlaxoSmithKline (GSK) appears to be focusing more on finding a new CEO than any large M&A deals after last year's $20 billion asset swap with Novartis, according to a briefing following strong Q1 results.

The board is searching for a successor to Sir Andrew Witty, who will retire at the end of March next year, and aims to find a replacement by the end of this year.

Witty told the telephone briefing with analysts and journalists that he will help guide the board as it looks for a new leader and give input about the demands of the job.

He said: "The board will ask for my comment. I am going to be willing to give them as much advice as possible. It's a decision for the board and they will make a decision towards the end of the year."

Witty said GSK was only interested in deals that will fill in any gaps in the company's portfolio of drugs, which has been transformed over the last year through the asset swap with Novartis.

Included in a set of new products that helped boost earnings were vaccines that GSK owns following the asset swap. Part of the deal involved GSK swapping its marketed cancer drugs for the Swiss company's vaccines portfolio.

Witty said: "We do continue to think about M&A as a tactical opportunity where we want to build strength. It's not a central part of a strategic direction."

Since the deal finished, Witty said the firm had been focusing on getting best value from the drugs it acquired.

The vaccines business it acquired had been loss-making. But Witty said: "We have fixed that over the last several months."

Sales rose 11% to £6.23 billion in the three months to March, above the analysts' forecast of £6.01 billion.

Witty described the latest set of results as a "high water mark", cautioning that the company faced a tough pricing environment in the US and uncertainty over the potential impact of a "Brexit".

Although drug pricing has been under scrutiny in the ongoing presidential election race, changes to healthcare systems in the US have also driven prices down, said Witty.

The healthcare exchanges set up under reforms introduced by President Obama have been focusing on driving down drug spend through measures such as restricted formularies, and this has been mirrored by other providers, said Witty.

"That is changing the way payers are negotiating," said Witty.

Sir Andrew Witty to retire as GSK CEO next year