Having been fined nearly $500 million in China for bribery, facing investigations in other countries and battling lagging revenue, GlaxoSmithKline (NYSE: GSK) now faces more cost cuts and is contemplating a stock offering for its ViiV Healthcare.
But GSK’s CEO Andrew Witty defended himself, the company and his strategy in discussing the drug giant’s most recent quarterly earnings report on Wednesday.
“Look at what we’re able to achieve,” he said.
Witty disclosed plans to make another $1.6 billion in cost cuts on top of other recent reductions even as GSK moves toward a hoped-for 2015 close of a huge multi-billion-dollar asset swapping deal with Novartis.
GSK reported a big drop in profits and revenue through the first nine months of 2014, a year so far dominated by headlines about scandals even as the drug giant accelerates development of a potential Ebola vaccine and the world’s first malaria vaccine.
“Of course it will affect jobs worldwide,” Witty said of the new expense reductions.
GSK operates its North American headquarters in RTP and a major manufacturing plant in Wake County as well.
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Witty also acknowledged that he was “disappointed” when asked about his own job performance, according to The Independent in London.
“It would be disingenuous of me to say I’m not disappointed by some of the pressures we’ve faced this year, but it happens,” he said.
Witty countered with some achievements.
“Look at what we’re able to achieve – the first vaccine for malaria, the first vaccine for Ebola potentially, the [$16 billion ] Novartis transaction.”
In a video interview published along with the earnings report, Witty defended the Novartis deal, which involves the sale of GSK’s oncology business, and the potential of a partial IPO for the ViiV joint venture, which is best known for promising HIV research and treatment,
Asked about the Novartis deal and ViiV strategy, Witty said the moves “a focus that I’ve been trying to drive.”
“Well this really reflects, certainly from my perspective, a focus that I’ve been trying to drive into our Group strategy and Group thinking
for GSK, which looks at not just the short-term earnings potential and growth potential – and the opportunities and challenges that you see there – but also thinks about how we can create the most flexibility to create value overall for our shareholders.
“So the Novartis transaction is all about bringing scale to our Consumer and Vaccine business. But of course it’s also critically about
crystallising $16bn of value for our Oncology business. And just think, seven years ago we had almost no Oncology business and we’ve created that business in the last few years, almost entirely from our own research efforts and now we’re crystallising a significant gain from that.
“And that’s a good example, I think, of how I like to look at the Group.
“Yes, there are ways in which we can develop products and businesses and over many, many years develop streams of earnings and sales. But there might be also situations where you look at an alternative way to bring that value forward to shareholders. Oncology’s a very good example, where we’re bringing forward, in my view in a risk-free way, a very substantial amount of opportunity for our
“Now when you look at ViiV, I think when I announced that structure five years ago – and in fact the fifth anniversary is just coming up – it surprised everybody that we could create such an organisation.
“The focus that we’ve been able to bring has been extraordinary. Combined with the successful development of new medicines, we’ve now got a very fast-growing, very substantial specialist business within GSK and with our partners at Shionogi and Pfizer.
“So the question really is is that absolutely the right structure to capture the best value for our shareholders or should we be open to alternatives? And that’s exactly what I’ve kicked off today, in terms of asking the question; could we create more value for our shareholders by exploring a partial IPO of the ViiV business?
“And we’ll see how that analysis goes over the next few months. But again, it simply signals an open-mindedness, if you will, around how we deliver value for the shareholders. Sometimes it will be in the more traditional Pharmaceutical model. But sometimes it might be in the way we’ve worked in Oncology, or perhaps, if we conclude this is the right thing to do, with something like a partial IPO for ViiV.”