The diplomat who forced Glaxo to take its medicine
Sir Andrew Witty has revived the world’s biggest drugs giant. Just don’t ask him about that scandal in China, writes Matthew Goodman.
AT LAST, some good news. For months, all anyone has wanted to ask Sir Andrew Witty about is the bribery scandal in China.
He runs Glaxo Smith Kline, No5 in the FTSE 100 and a pillar of British business. The idea of it paying bribes is like your granny turning out to be a crack dealer.
The Chinese claim local staff ran a slush fund to persuade doctors to prescribe Glaxo’s drugs. Witty, his face more lined than when I last met him, finds it embarrassing. ‘‘I am saddened and disappointed any time the company is criticised for its behaviour, and this is no exception,’’ he says with a shake of his head.
Trim and with closely cropped hair, Witty has been in full damage limitation mode, sorting out the mess. The scandal has threatened to overshadow the work the Glaxo chief has done reinventing the drugs colossus. He has ripped through the monolithic research departments and made the scientists compete for money – a tough cultural change in an institution like Glaxo.
That work is now bearing fruit. Last year, Glaxo was responsible for five of the 27 drugs approved by American regulators, more than any of its rivals. Another 10 are ready to move into trials involving large numbers of patients over the next two years.
‘‘I feel good about that,’’ says Witty, pulling off his tie and jacket and settling back at Glaxo’s London hideyhole – a Mayfair town house.
What’s more, some of the new medicines are as cheap as possible, unusual in an industry not renowned for price wars.
‘‘Most people expect new drugs to cost more than the old ones,’’ says Witty. ‘‘The cancer drug we’ve just launched [a melanoma treatment] costs 25 per cent less than the product on the market today. Our new respiratory drug [Breo] is the same price as the old one.’’ For some, it will be strange to hear Witty preaching about cheap drugs. After all, like many of its rivals, Glaxo has been a target for angry campaigners over its track record of making medicines available to the world’s poorest.
The chief executive of Bayer, a German rival, provoked uproar last month when he suggested his company made medicines only for those who could afford to pay.
‘‘We want to leverage our scientific expertise to develop medicines for people wherever they come from,’’ says Witty. ‘‘I am prepared to be open-minded that it’s OK to have different business models and potentially different price points in different parts of the world because people have different levels of affordability.’’ One reason Glaxo is able to charge lower prices for new drugs is because its R&D arm has become more efficient as a result of being split into small units, with scientists pitching for funding. Overall spending on R&D fell by £600 million last year to £3.9 billion, (NZ$1.185b to NZ$ 7.7b) while returns on investment are up – they are 13 per cent today.
But how many of the latest victories are down to the changes Witty has made? After all, it typically takes a decade or more to develop a new drug and Witty has been in charge for only six years.
‘‘Of course in any big R&D organisation a lot of the seeds are sown long ago. Our malaria vaccine is a good example – they began work on that when I was at university.
‘‘But I would say we have really transformed the sense of creative, accountable discovery in the early side of the organisation, and you are starting to see some of that come through now. Much of the pipeline I touched on [at the company’s results last week] is beginning to be the fruit of that.’’ Witty, who turns 50 in August, says Glaxo has also become smarter at running the critical trials that decide whether a drug is a flyer or a flop. There’s nothing like a few hits to get things going: ‘‘That sense of energy . . . it’s incredible.’’ He points out that 3,200 staff – one in four of the R&D army – had a hand in developing Breo.
Not everyone is impressed. Analysts at the investment bank Citigroup published a research note this month branding Glaxo’s pipeline of new drugs
Most people expect new drugs to cost more than the old ones. The cancer drug we’ve just launched [a melanoma treatment] costs 25 per cent less.
‘‘underwhelming’’. Another bank, Berenberg, pointed out that Glaxo has managed a success rate of only 50 per cent with data it has published on late-stage trials of new drugs.
Witty shrugs. ‘‘There were a couple of big programmes last year where, yes, the initial data on them was not positive, but we’ve got several more sets of results to come in on those drugs. People should be cautious about writing things off. Since 2009, we’ve had 17 new drugs or vaccines approved by the US Food and Drug Administration. The next best got nine. We have another bunch rolling through the system and another 40 coming up behind. Everyone is entitled to their own opinion . . . I think we’re doing an OK job of it so far.’’ It might all have turned out rather differently. After graduating in economics from Nottingham University, his sole ambition was to join the management training programme of a big company.
When Glaxo made its offer in the summer of 1985, Witty was already contemplating a proposal to join – he pauses, worried I will make too much of it – Austin Rover. ‘‘They had a very good management development programme . . .I came here. I didn’t regret it.’’ While rising up the Glaxo ranks, Witty worked all over the world. He ran the South African business and was head of the group’s European operations when he was one of three senior executives given a shot at succeeding Jean-Pierre Garnier as chief executive.
I interviewed him two months after he took over, and at the time he promised to reduce the company’s reliance on a few blockbuster drugs and instead deliver a stream of new medicines – exactly what he is doing. The market seems to like what it has seen. Glaxo shares are up by about a third in his six years – the company’s market value has soared from about £55b ( NZ$108b) when The Glaxo name traces is roots back to colonial New Zealand in 1873. Local entrepreneur Joseph Nathan established a trading company under his own name in Wellington that was a forerunner to Glaxo’s milk powder drying operation at Bunnythorpe in the Manawatu. Nathan became interested in dried milk and in 1904 secured a drying process and then built his first dried milk factory under the brand name Defiance. The name didn’t catch on with consumers so the Nathan directors eventually settled on Glaxo which was registered in 1906. The company’s been through a number of mergers with the most recent being in 2000 when Glaxo Wellcome and Smith Kline Beecham joined to form Glaxo Smith Kline. The new Australasia region consisting of GSK Australia and New Zealand was set up in 2003. Glaxo’s consumer brands include household names such as Panadol, Macleans, Horlicks, Zovirax and Sensodyne. Witty took over to pounds £78b (NZ$174b) today.
The boss is also eager to point out that, on his watch, huge amounts of capital have been returned to investors through dividends and share buybacks. ‘‘We must have paid out £30b (NZ$59b). We’ve not splashed it on a big acquisition. We’ve not wasted that money.’’
There has not been a headlinehogging deal, such as the merger that led to Glaxo Wellcome joining forces with Smith Kline Beecham in 2000, but Witty has overseen a programme of smaller-scale deals, including selling Lucozade and Ribena to Suntory, the Japanese whisky maker.
He remains keen on the consumer health division, which makes Sensodyne toothpaste and Panadol headache pills. It is also rather big in nicotine gum and patches, so might that lead to a move into electronic cigarettes?
‘‘I would be interested to hear where the World Health Organisation comes out on them. I would not want to do anything until we have a clearer view. More needs to be known about their safety,’’ he says.
It is the sort of diplomatic response the Glaxo boss has perfected. His diplomatic skills are likely to be put to their severest test when the Chinese announce the outcome of their investigation into those bribery allegations. Witty admits the situation ‘‘frustrates’’ him and hopes it won’t overshadow the good work being done elsewhere
‘‘It would be wrong to be knocked off course on the mission we are on.’’