Emma Walmsley, CEO of GlaxoSmithKline
Mandel Ngan/AFP via Getty Images
GlaxoSmithKline ‘s CEO Emma Walmsley will face a restive investor base on Wednesday, as the company outlines its vision for the future amid a reported challenge from activist investors.
The company is holding a 2½-hour online investor event on Wednesday, led by Walmsley, beginning at 9 a.m. Eastern time. It will lay out Glaxo’s plan for what it calls New GSK, the company that will be left behind after it spins off its consumer healthcare division sometime next year.
The event comes amid a push by the activist hedge fund Elliott Management, which has bought up shares in Glaxo (ticker: GSK), according to reports. The Financial Times reported Saturday that Elliott was raising questions about whether Walmsley should lead New GSK after next year’s spinoff.
Glaxo shares have stagnated in recent years. The company’s American depositary receipts are down 3.5% over the past year, while the S&P 500 is up 35.5% over the same period, and the S&P 500 Healthcare index is up 24.9%.
And while the S&P 500 has climbed 53.2% over the last three years, the price of Glaxo’s ADR has been effectively flat. The ADR closed at $39.78 on Monday, and at $40.81 on June 21, 2018. It was down 1.2% in Tuesday morning trading, to $39.30.
New GSK will include the company’s vaccine business, one of the world’s largest. It will also include an oncology portfolio, an HIV franchise through its majority ownership stake in Viiv Healthcare, and other drugs, which have largely failed to excite the interest of investors in recent years.
At the investor event on Wednesday, Glaxo’s management team will detail its strategy for New GSK and its prospects for growth. There will be an hour for investors’ questions, which could be heated.
The event comes amid a busy week for Glaxo, which has included business updates and criticism from a high-profile healthcare analyst.
On Tuesday, Glaxo announced that ViiV Healthcare, an HIV specialty firm of which it is the majority shareholder, had signed a deal with Halozyme Therapeutics (HALO) for access to a Halozyme technology that could make ViiV’s HIV drugs last longer. In January, the U.S. Food and Drug Administration approved ViiV’s Cabenuva as the first long-acting treatment for HIV-1 infection, administered monthly. The Halozyme technology could even further reduce the frequency with which the drug would be administered.
The moves by Elliott Management, meanwhile, and the weakness in the company’s share price, have have set off a wave of broad reconsiderations of Glaxo’s structure on Wall Street.
SVB Leerink analyst Dr. Geoffrey Porges argued in a note on Tuesday that the vaccine business would be worth more on its own.
“If the business was independent, and was not subsidizing the pharmaceutical business, it could be worth considerably more,” Porges wrote. “If the vaccine business was truly independent, we believe that the management team could allocate capital more effectively to optimize that business, which would allow the company to be much more active in emerging technologies, such as mRNA, and in important new infections such as Covid.”
Walmsley and Glaxo’s executives will likely be asked on Wednesday to defend their vision for New GSK, which currently includes the vaccine business along with the rest of the company’s pharmaceuticals. Their answers will determine investor sentiments around the stock, and possibly Elliott’s next steps.
Write to [email protected]
