Commercial Activist investor Elliott Management asks for new board and...

Activist investor Elliott Management asks for new board and CEO to reapply


Before the splitting of GlaxoSmithKline’s consumer healthcare sector next year, Elliot Management, an activist US investor, has effectively requested that Dame Emma Walmsley should apply again for her post as the CEO of GSK.

The New York hedge fund, which has acquired a “significant” share in GSK in April, issued a public letter to the board and chairman of GSK, outlining a series of proposals to regain the reputation of GSK following “years of disappointing performance” according to the letter. It is the first public remark of Elliot following the company’s investment.

Elliot had demanded that GSK should hire new members of the board of directors who have extensive knowledge in pharmaceutical and consumer health sectors, as well as introduce a method to appoint “the best executive leadership” for the vaccine and pharmaceutical division, also including the consumer health sector, which includes products such as Nicorette and Sensodyne. This would compel Walmsley to apply again for her job, who is intended to lead the business through its reorganization and becoming the CEO of the new GSK.

On Thursday, GSK’s shares rose 1.3% to £14.38

This letter puts higher pressure on Walmsley, who managed the consumer health business before taking over as the CEO of GSK four years ago from Sir Andrew Witty. As she does not have any scientific knowledge, several investors are skeptical that she is the ideal person to manage the new GSK. On an investor day last week, she responded to the critics by calling herself a “change agent”.

Elliot slammed GSK’s ten-year poor performance, its “overly bureaucratic” research procedures, and erratic strategy. It highlighted the selling of Witty’s cancer division to Novartis in 2015, accompanied by Walmsley’s return to oncology in 2018.

Elliot proposed that executive incentives should be tied to more aspirational goals, such as achieving a 32% operational profit rate by 2026 and meeting R&D (Research and Development) objectives. It also advised GSK to look into the possibility of selling the consumer division before the separation.

GSK has outlined the sales target for vaccines and pharmaceutical products division of £33 billion by 2021, which is nearly equal to £34 billion earned by the entire firm and consumer health sector last year. The shares of the company have surged in the days following the update, with City experts praising the targets, and Royal London Asset Management, expressing its support.

 GSK spokesperson said: “The legacy issues that Elliott identifies in its letter are not new.” The spokesperson added that shareholders were supportive of GSK’s plan to “deliver a step-change in performance” and were “focused on GSK executing on it without distraction or delay. This is our clear priority”.

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