IT’S A mark of how weak Emma Walmsley’s position is at GSK that she can announce a potential breakthrough on a Covid vaccine and still see no progress in the share price.
GSK’s failure to make the first round of Covid jabs has become a symbol of what is seen as a wider structural problem at the company: that Walmsley’s strategic changes have been too slow and are failing to come up with the goods while rivals deliver in spades.
That is, of course, why activist investor Elliott has come on board.
Her plan for GSK is to split it into two companies — a pharma giant and a consumer products group, with her running the pharmaceuticals bit.
Elliott’s arrival on the scene has made some see it as inevitable that it will force GSK to make a number of changes to that: one — split vaccines off from the pharma business and sell the latter; two — sell the consumer arm quickly rather than wait for the demerger; three — slow down R&D, citing recent drug development failures; four — kick Walmsley out for not being a trained scientist.
It’s early days, but I’m not sure Elliott will achieve any of that.
Sure, shareholders are grumbling about the poor share price, but GSK is still at the early stages of a monster overhaul. Changing tack now would simply bring more risk to shareholders.
If Walmsley IPOs the consumer business next year, and sees its Shingrix vaccine for shingles get back to its pre-Covid blockbuster growth levels, market sentiment could quickly improve. The share price would follow.
The weak pipeline in the pharma business is a big worry, but it’s not clear how the reported Elliott proposals fix it.
And that’s the point. For shareholders, there really are no quick fixes to GSK. The Walmsley medicine takes a while, might not work all that well, and doesn’t taste nice. But for now, it’s the best they’ve got.