Yahoo Finance GlaxoSmithKline shares jump at news of activist hedge fund interest
Shares in GlaxoSmithKline jumped on Thursday, after it emerged that the activist hedge fund Elliott Management has built a sizeable stake in the company, signalling a potential battle over the future of the UK drug maker.
New York-based Elliott, which is run by the billionaire Paul Singer who founded the firm in 1977, is understood to have made the multibillion-pound investment in recent days.
GSK was one of the FTSE 100’s biggest risers on Thursday, when shares closed 5% higher at £13.48 after the move, which was first reported by the Financial Times. But even after the gains, the share price is still 17% lower than where it was a year ago, after hitting its lowest levels in a decade in February.
Elliott, which has assets under management of about $42bn (£40bn), is known for being an aggressive activist investor, having waged campaigns for change at a number of companies, including one of the world’s largest mining groups, BHP, and Premier Inn owner Whitbread. In the health sector, it pushed for the sale of the rare disease specialist Alexion Pharmaceuticals before it was bought by AstraZeneca for $39bn in December. The hedge fund was also embroiled in a 15-year battle with Argentina over debt payments.
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GSK’s market value has shrunk to £69bn from £80bn in 2017 when Emma Walmsley, the former head of the company’s consumer healthcare division, was promoted to chief executive, tasked with reviving the business. She reorganised research and development to slim down the pipeline and focus on “real winners”, in particular cancer treatments.
The share price has been under pressure as GSK’s efforts to rebuild its portfolio of new medicines have yet to deliver. While its UK rival AstraZeneca and US firms Pfizer and Johnson & Johnson have successfully developed Covid-19 vaccines, GSK has lagged – the vaccine it is working on with France’s Sanofi has been delayed after it failed to produce a strong immune response in older people.
Elliott’s investment in GSK comes as Walmsley prepares to break up the company, by splitting its consumer healthcare business, with brands including Sensodyne toothpaste, ChapStick lip balm and Panadol painkillers, from the pharmaceuticals and vaccines division next year.
Michael Hewson, chief market analyst at CMC Markets UK, said: “This activist shareholder has a track record of shaking things up and Glaxo shares have seriously underperformed the wider market for several years. Earlier this year they hit their lowest levels in a decade, with the company being increasingly left behind by its peers AstraZeneca and Pfizer.”
While there is thought to be broad support among shareholders for Walmsley’s strategy, some investors have been getting restless over slow progress with the drugs pipeline.
Walmsley worked for the beauty firm L’Oréal for 17 years before joining GSK. She intends to lead the pharmaceuticals and vaccines business after the split, but some investors appear to question whether she is the right choice.
Adam Barker, healthcare analyst at Shore Capital, said: “GSK is coming to a pivotal point in its strategy as it breaks the business up and there are big questions on capital allocation between the standalone units, whether they’re ready to stand on their own as independent business units and who will lead them.
“So there’s plenty of important discussions to be had and I think the share price move today is partly a reflection of the fact that investors now think the strategy will get a thorough evaluation and those discussions will happen.”
GSK and Elliott declined to comment.
