GlaxoSmithKline shareholders “relieved” as Elliott rules out aggressive demands

GSK profits

PA Wire

27 May 2021

GlaxoSmithKline’s embattled boss Emma Walmsley won a double fillip today as the company launched its belated Covid-19 vaccine trial on 35,000 people and it emerged that activist investor Elliott was not planning to force aggressive disposals.

Faced by a dismal share price performance and trailing rivals in the hunt for a Covid jab, the company which boasts of being the world’s biggest vaccine maker has come under increasingly heavy fire.

Elliott, which took a stake in the group earlier in the year, had been expected to push for cuts in its £5 billion research budget and force a sale of either its vaccines or medicines arms.

Shareholders who have been contacted by the activist, however, say neither of those plans are on its agenda, the Times reported today.

One major fund manager describing himself as a “long suffering shareholder” told the Standard: “Frankly, it’s a relief, because neither of those ideas made sense. It would be insane to curb R&D and selling the vaccines arm would kill off the pharmaceuticals cashflow. So we’re relieved but baffled about what Elliott is planning to do.”

Analysts said Elliott may have changed tack after appreciating the strategic political importance of GSK to the UK. Business Secretary Kwasi Kwarteng is known to be concerned about the prospects of a break-up of the pharma and vaccines division.

One pharmaceuticals source said: “Elliott’s track record is that it likes to keep its options open when it first moves on a company and that has been the playbook so far with GSK. But it is now clearly narrowing its options. The key issue for GSK now is not to get distracted by all the noise while we all wait for Elliott’s next move.”

Several major shareholders have offered Walmsley their support to continue her overhaul of the company which involves splitting off the consumer arm of the business next year, with her remaining in place running the pharmaceuticals and vaccines side.

Today the vaccine arm announced it was commencing Phase III trials of its Covid vaccine with Sanofi, having hit hitches last year. It is an “adjuvant”-based vaccine, in which an antigen made by Sanofi is mixed with a GSK adjuvant which acts as an accelerant.

The hope is that it will have fewer side-effects than adenovirus vector versions such as AstraZeneca’s and be cheaper to mass produce than MRNA versions like Pfizer/BioNTech’s. GSK and Sanofi are major vaccine producers so can produce at huge scale in-house.

A further hope is that it can be used as a booster jab after the pandemic passes. GSK has pledged not to make a profit from the current intense phase of the crisis but could produce boosters for profit in future years.