Saturday, October 23, 2021

GlaxoSmithKline, under activist pressure, gets some relief as Elliott won’t push for sale or slash R&D: report

Investors have been eyeing a potential shakeup at GlaxoSmithKline ever since Elliott Management took a large stake in the company last month. After concerns of a potential sale emerged last week, it appears the activist investor aims to take a more conservative tack.

Elliott won’t angle to sell off GlaxoSmithKline’s pharmaceuticals and vaccines business, nor does it plan to slash the company’s £5 billion ($7.08 billion) R&D budget, The Times reported Thursday. It also supports GSK remaining in the U.K.

The news, if confirmed, would come as a relief to GSK—and the British government, which last week pressed officials to monitor the situation over fears the activist investor might agitate for a break-up or sale.

Elliott in mid-April acquired a “significant” multibillion-pound stake in GSK, though just how big a position the hedge fund took—and why—remains unclear. Both GSK and Elliott told Fierce Pharma they couldn’t comment on the situation right now. 

Elliott has been in talks with other GlaxoSmithKline shareholders and, behind the scenes, is thought to have consulted privately with the company’s management, The Times reports. Last week, the newspaper reported that Elliott had met with GSK shareholders and delivered the ominous message that “change is coming.”

RELATED: Activist investor Elliott takes ‘significant’ stake in GlaxoSmithKline amid string of setbacks: report

The Elliott pressure has emerged during a turbulent time for GlaxoSmithKline CEO Emma Walmsley, who’s been forced to defend her stewardship of the company after a series of R&D setbacks in 2020 and early 2021. Walmsley is set to deliver “a clear view of the strategy for new GSK” at an investor event on June 23, where she’s expected to outline details on the company’s planned consumer health separation.

While Elliott seems content to keep GSK’s biopharma business and R&D budget intact, it could seek to sway certain aspects of the consumer health carve out, The Times speculated. Speculation has centered around whether Elliott intends to speed up the separation, but it’s unclear whether that’s even possible at this point.

RELATED: Activist investor blasts Alexion’s $1.4B Portola buy in scathing open letter

For her part, Walmsley recently won the public support of GSK chairman Jonathan Symonds, plus backing from major investors BlackRock, Dodge & Cox and U.K.’s Royal London.

Meanwhile, GSK now has the UK watching its back. UK business secretary Kwasi Kwarteng last week asked officials to connect with Glaxo and monitor the potential fallout of Elliott’s investment, according to The Times. He’s believed to have chipped in his support for Walmsley and her ongoing restructuring plan.

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