Activist investor Elliott takes takes a stake in Glaxo

Elliott, s US hedge fund, took an undisclosed multibillion-pound stake in GSK last week, driving the share price up by 4.6%.

GlaxoSmithKline has suffered several setbacks this year. A cancer drug seen as a potential “blockbuster” failed a late-stage trial, while another drug suffered an unexpected delay owing to Covid-19, says Jamie Nimmo in The Times. Some analysts worry that these “serial disappointments” are becoming a “major concern for GSK’s... outlook”. But help may be at hand. Elliott, the US hedge fund led by activist investor Paul Singer, who is “feared in boardrooms” worldwide, took an undisclosed multibillion-pound stake in GSK last week. The news boosted the shares by 4.6%.

No wonder shareholders are frustrated, says Lex in the Financial Times. GSK’s share price has moved sideways since Emma Walmsley was appointed CEO four years ago. However, “one wonders what change is sought”. After all, while most activists “demand some form of corporate divestments or restructuring”, Walmsley “already has this in train”, with a “long-planned” flotation of GSK’s consumer health business due in the next year, “leaving a biopharma core behind”. 

Elliott could ask GSK to “cut back on in-house research and development, and spend more on acquisitions” to boost the “otherwise lacklustre” drug pipeline, says Aimee Donnellan on Breakingviews. It could also insist that Walmsley “spin off the consumer division, rather than list it and hang on to a stake”, which might “make a takeover of either business easier”. In any case, the positive reaction to Elliott’s involvement suggests that if it does make demands, “it can count on other shareholders’ support”.

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