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GSK shares jump after activist hedge fund builds big stake

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Emma Walmsley
Emma Walmsley

Hedge fund Elliott Management has built up a multi-billion pound stake in drugmaker Glaxosmithkline, sparking speculation the activist could demand a shake-up at the top of the company.

Shares in GSK rose 6.1pc after the investment was revealed as traders bet that Elliott could launch a campaign to boost its flagging stock price. The New York-based firm has a long history of taking minority stakes in businesses it regards as possible takeover targets, and piling pressure on management.

The size of Elliott's stake in GSK has not been disclosed. The investment was first reported by the Financial Times.

The pharmaceuticals firm's shares are lagging behind rivals' and are down by almost a third since January 2020. They have fallen 14pc since Dame Emma Walmsley became chief executive in April 2017.

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Some shareholders are said to be disillusioned with Dame Emma's leadership and lack of a scientific background in comparison to the likes of AstraZeneca boss Pascal Soriot, a former vet.

She is spinning off the company's consumer health division into a separately listed company, a move supported by many investors who argue it will allow GSK to focus on drug development. However, some shareholders reportedly believe Dame Emma should become head of the consumer company rather than staying in charge of the drugmaking operation.

Markets Hub - GlaxoSmithKline
Markets Hub - GlaxoSmithKline

The changes will leave the company with a cleaner balance sheet and the firepower needed to invest in its ailing drugs pipeline. The consumer division will be merged with Pfizer's to create a global titan headquartered in the UK, in a separation process which should complete in mid-2022.

Dame Emma is not the only pharmaceuticals boss without a science degree. The chief executives of Eli Lilly, Johnson & Johnson, Roche and Merck have business backgrounds. Pfizer boss Albert Bourla is a vet by training, while Novartis and Bristol-Myers Squibb are both run by former medics.

AstraZeneca shares have soared by 80pc over the past five years, compared with GSK's 10pc decline over the same period.

Glaxo's valuation is also low compared with rivals. Its shares trade at 12 times earnings, while other firms are at a multiple of about 27.

The company's £68bn value is significantly lower than AstraZeneca's £97bn, France's Sanofi at £106bn and Swiss drugs giant Novartis which is worth £200bn.

GSK declined to comment and Elliott was not available for comment.

Bosses at GSK also annonuced that Emmanuel Hanon, head of vaccines research, was leaving after 20 years to join supplements company Viome. 

Amir Reichman, former head of global vaccines engineering core technologies, left at the beginning of the year, while head of US pharmaceuticals, Jack Bailey, departed in last 2020.

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