January 27, 2023

GlaxoSmithKline Talks Up Growth Prospects as Activist Investor Elliott Looms

Pharmaceutical giant

GlaxoSmithKline PLC

GSK 1.99%

pledged to accelerate growth and gave further details of the long-planned separation of its consumer-healthcare business, as it seeks to ward off a potential clash with activist investor Elliott Management Corp.

The British company said Wednesday that it expects revenue from drugs and vaccines to hit at least £33 billion, equivalent to $46 billion, by 2031, compared with the £24 billion it reported for those businesses last year. It forecast sales to grow at least 5% a year from 2021 to 2026 and adjusted operating profit to increase by at least 10% a year over the same period.

Glaxo’s strategy has come under investor scrutiny lately after Elliott—known for waging forceful campaigns for change at various companies it has invested in—took a stake in the drugmaker. Elliott bought its stake earlier this year, according to a person familiar with the matter, but hasn’t disclosed the size of its position, nor publicly discussed its aims.

With Wednesday’s update, which had been planned before Elliott’s investment, GlaxoSmithKline Chief Executive Emma Walmsley aimed to convince investors that her yearslong shake-up to revive the company’s fortunes will soon pay off. She said recently approved products and the company’s late-stage pipeline would drive growth. One of the company’s big bets is Cabenuva, a long-acting treatment for HIV that requires monthly injections instead of daily pills.

As CEO, Emma Walmsley has poured more investment into research and replaced most of the top management.



Photo:

Kevin Dietsch/Zuma Press

“The scale of the changes made in the last four years is unprecedented,” Ms. Walmsley said. “We’ve made enormous progress on multiple fronts.”

She added that Wednesday’s forecast didn’t include any input from Glaxo’s Covid-19 projects, due to the uncertainty around how the pandemic would play out, and the longer-term prospects for such products. Glaxo has one approved therapy for Covid-19, an antibody treatment it developed with Vir Biotechnology Inc. for early infections. It is also developing various vaccines, including one in partnership with Sanofi SA.

Glaxo’s share price performance has for several years lagged its pharmaceutical peers. When Ms. Walmsley became CEO in 2017, she took the helm of a company that investors said didn’t invest enough in research and development, and depended too heavily on selling drugstore staples such as Sensodyne toothpaste to reduce the company’s exposure to the boom and bust cycle of developing new drugs.

Ms. Walmsley has reversed that strategy by pouring more investment into research and replacing most of the top management. She has also bet big on cancer drugs, filling Glaxo’s oncology pipeline through a series of acquisitions.

Another big move was to combine Glaxo’s large consumer-healthcare business with that of

Pfizer Inc.

with the intention of creating a stand-alone company.

Those efforts have yet to convince investors that the company is turning a corner. Before Wednesday’s announcement, shares in Glaxo were 16% down from when Ms. Walmsley took over. Over the same period, the S&P Pharmaceuticals Select Industry Index rose 22%.

On Wednesday, in addition to talking up its growth prospects, Glaxo said the separation of its consumer-healthcare unit, which brings in nearly one-third of the company’s revenue, would take place next year.

Glaxo, which owns 68% of that business, said it would retain up to one-fifth of its stake, with the remainder being spun out to create a new London-listed company. It said the stake was a short-term investment that it planned to sell “in a timely manner” to raise funds for its drug and vaccine business.

As well as creating a sharper focus, the separation will give the remaining business more freedom to invest because the new company would take on a disproportionate share of the group’s debt. Glaxo will receive a special dividend of up to £8 billion from the consumer-healthcare business as part of the separation plan.

SHARE YOUR THOUGHTS

What is your outlook for GlaxoSmithKline? Join the conversation below.

In another move to help fund investment, Glaxo said Wednesday it would cut its dividend to 55 pence a share next year, compared with the current level of 80p.

Glaxo shares were up 3% in afternoon trading Wednesday.

Since taking its position, Elliott has approached several of Glaxo’s biggest investors, according to some of those contacted by the hedge fund. It has made a case for separating Glaxo’s vaccines arm and ViiV, its HIV treatment business, into stand-alone companies, one of the people said. Elliott maintained its silence on Glaxo, declining to comment Wednesday.

Ms. Walmsley on Wednesday defended Glaxo’s ownership of the vaccines business, pointing to the success of its blockbuster shingles vaccine Shingrix. She also argued that the lines between prevention and treatment were blurring, so it made sense from a research perspective to keep the two businesses together.

Write to Denise Roland at [email protected]

Corrections & Amplifications
Glaxo said it would retain up to one-fifth of its stake in the consumer-healthcare business and that it would receive a special dividend of up to £8 billion as part of the separation. An earlier version of this article incorrectly said it would retain one-fifth of its stake and receive a special dividend of £8 billion. (Corrected on June 23, 2021)

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Related Posts

The Pizza Business Is Divided on Delivery

May 30, 2021

May 30, 2021

The industry that pioneered delivery food is divided on whether to make its pies available through apps like DoorDash DASH...

Pfizer Suspends Global Distribution of Chantix Smoking-Cessation Pill on Contamination Concerns

June 25, 2021

June 25, 2021

Pfizer Inc. PFE 0.03% has suspended distribution world-wide of antismoking pill Chantix and recalled some lots after finding they contained...

EA, Other Videogame Companies Target Mobile Gaming as Pandemic Wanes

July 3, 2021

July 3, 2021

Videogame companies are increasing their financial bets on mobile games as pandemic restrictions ease and people ditch their PC and...

Biden, Yellen Seek Backing for $2.3 Trillion Infrastructure Package

May 19, 2021

May 19, 2021

President Biden and Treasury Secretary Janet Yellen promoted the administration’s infrastructure and tax plans as vital for the U.S. to...

Apple and the End of the Car as We Know It

May 22, 2021

May 22, 2021

Now that the car is evolving into essentially a smartphone on wheels, it’s no wonder Apple is kicking the tires....

Tesla Shareholder Panasonic Sells Stake for $3.6 Billion

June 25, 2021

June 25, 2021

TOKYO— Tesla Inc.’s leading battery supplier is no longer a Tesla shareholder. Panasonic Corp. said Friday it has sold its...

Kantar Hires Chris Jansen as Its New CEO

July 1, 2021

July 1, 2021

Data and media research business Kantar has named Chris Jansen its new chief executive officer, effective Nov. 1. Mr. Jansen,...

Far From Texas, Huge Gas Bills Stoke Anger After February Freeze

June 27, 2021

June 27, 2021

An angry backlash is building across the middle of the U.S. as states step in to help their constituents pay...

What a Tech Breakup Could Mean for You

July 3, 2021

July 3, 2021

As momentum builds to curtail the power of Big Tech, lawmakers, Beltway pundits and the companies themselves are all competing...

Ford Expects 40% of Global Vehicle Volume to Be Fully Electric By 2030

May 26, 2021

May 26, 2021

Ford Motor Co. F 8.42% plans to boost spending on electric-vehicle development by billions of dollars beyond previous plans and...

How a Beer Giant Manages Through Waves of Covid Around the World

June 27, 2021

June 27, 2021

In late March, executives at the biggest brewer in the world were working on a project they had code-named EU-phoria....

Heavy Industry’s Daunting Net-Zero Challenge

June 3, 2021

June 3, 2021

More companies are pledging to achieve net-zero carbon emissions as they work to convince investors and consumers they can reduce...

Technology Provider Kaseya Warns of Cyberattack

July 3, 2021

July 3, 2021

Kaseya Ltd. warned Friday afternoon that a key software tool used by companies to manage technology at other businesses may...

GM Sees Brighter Profit Outlook as It Fends Off Computer-Chip Crunch

June 3, 2021

June 3, 2021

General Motors Co. GM 5.93% expects profits to be better in the first half of the year than it previously...

Biden Nears Endgame on Fed Chair Decision

November 22, 2021

November 22, 2021

President Biden faces one of the most important economic policy decisions of his presidency, which is expected this week, when...