GSK faces struggle to convince investors as activist Elliott lurks

Emma Walmsley, GlaxoSmithKline chief executive, faces a struggle to win over key shareholders after Elliott Management attracted converts for radical change at the pharma group, according to leading investors.

Ahead of GSK’s investor day next week, activist investor Elliott has sown doubt about whether Walmsley should stay to push through the transformation planned for the group after it spun off its consumer health division last year. 

One top-20 shareholder said some investors were attracted by a change of management after discussions with Elliott, which took a multibillion pound stake in GSK earlier this year. “Her background is in consumer rather than healthcare, which may be why,” he said. 

Another large shareholder said it appeared that Elliott did not want Walmsley to lead the pharma business and may also be pushing for a separate initial public offering of GSK’s vaccine unit, breaking the company up even further than planned. Elliott declined to comment.

At the event on Wednesday, shareholders are likely to ask whether GSK should be spending so much playing catch-up in cancer drugs, and if it should be trying instead to bolster its near-term pipeline to compensate for the loss of exclusivity on some HIV drugs later in the decade, or focus on next generation therapies five to 10 years out. 

Even shareholders that have yet to decide whether to back Elliott’s efforts are closely watching the investor day. One large asset manager said they were “very much looking forward to the capital markets day” and hearing what Walmsley has to say.

The GSK chief executive will focus her presentation — which kicks off a days-long investor roadshow — on the promise of “new GSK”, trying to prove she has the clear vision to refresh the drug pipeline, if given the time to do so. 

Luke Miels, president of GSK, who runs the commercial business, compared the company to AstraZeneca, where he used to work, which was also behind in oncology but has now rocketed ahead.

“I think these things take time and then I can remember meeting investors with Astra and being challenged about progress in oncology,” he said. “I think it’s about picking the right assets and moving forward. And we’ve got a number of opportunities coming through.”

Walmsley will offer the first long-term financial forecasts for the company, detail the future of its dividend policy, and present her decision on whether to demerge and do an initial public offering of the consumer healthcare unit, or simply spin it off. 

It will be tough to please all shareholders, who range from investors eager to see an IPO of the consumer business to fund investment in innovative medicines, to those concerned that a listing would simply mean they had to buy the shares again. 

“I want to know what is emerging with the promise from the pipeline and [have] confirmation the consumer business will be demerged, not IPO’d, as I own it already and don’t want to have to buy it to shore up their balance sheet,” said the second shareholder. 

The GSK board and executive team have been meeting with the top-40 shareholders in the run-up to the event. 

 “Shareholders are telling us that they are very supportive of the strategy we have set out, and they want us to get on with delivering it and not get distracted,” the company said.

Additional reporting by Arash Massoudi

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