Shake-up at GSK won’t placate investors

GSK has launched a radical shakeup of its operations, but that's unlikely to satisfy investors unhappy with the drugmaker's perennial underperformance.

Emma Walmsley (pictured), CEO of GlaxoSmithKline (GSK), has launched “the most radical shake-up” of the group in 20 years, says Hannah Boland in The Daily Telegraph. The plan is to spin off GSK’s consumer-healthcare arm, “which makes toothpaste and... painkillers”, and use the cash raised to boost sales at the core business, dubbed “new GSK”. 

With several drugs about to lose patent protection, the dividend will be cut, with the money saved reinvested in “a hunt for new blockbuster drugs”. Walmsley is under increasing pressure, says Boland in The Sunday Times. Since 2017 she has “slashed” poorly performing drug programmes, revamped management and “pushed the drugmaker back into oncology”. But this has not satisfied investors irked by GSK’s “perennial underperformance”.

Some want new leadership, while the decision of activist fund Elliott Management to take a stake in GSK is another challenge to her authority. Those calling for “radical change” at GSK are likely to be disappointed by this latest “fudge”, says Lex in the Financial Times. Walmsley’s promise that GSK will “coalesce around core pharma” is undermined by the fact that even after the hived-off consumer unit is listed, GSK will retain up to 20% of the new company. 

This in turn “reduces the kitty earmarked for dealmaking and research and development”. While this “vacillating” is “understandable”, as blockbuster drugs “take a long time to come to market”, Walmsley’s plan won’t “quieten those calling for her resignation”.

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