Elliott Calls for Board Changes at GlaxoSmithKline Ahead of Consumer-Healthcare Spinoff — Update

– Activist investor Elliott has urged GlaxoSmithKline to appoint new directors

–Elliott also urged the drug maker to consider selling its consumer healthcare business

– In his first public comments since building a stake in the company, Elliott criticized GlaxoSmithKlineK’s underperformance

From Adria Calatayud

Activist investor Elliott Management Corp. has requested GlaxoSmithKline PLC to evaluate its board of directors and management prior to a long-planned separation of its consumer healthcare business and to consider a sale of the entity.

The investor increased pressure on GlaxoSmithKline a week after the UK pharmaceutical company outlined its future plans to convince investors that Chief Executive Officer Emma Walmsley’s turnaround efforts will pay off.

In a letter published Thursday, Elliot criticized GlaxoSmithKlines “poor performance and value creation”. In Elliott’s first public intervention with GlaxoSmithKline since building an interest in the FTSE 100 company, the investor said the group’s combined businesses should be worth around 45% more than GlaxoSmithKline’s current valuation.

Elliott urged the company’s board of directors to appoint non-executive directors with expertise in biopharma and consumer healthcare prior to the split and to implement robust processes to select the best executives for the two companies, considering both internal and external candidates.

Ms. Walmsley, who became CEO in 2017, has driven more investment in research and the divestment of the consumer healthcare business.

“Elliott is not in favor of a specific outcome, but advocates a robust process as it is critical that the board reassure current and future shareholders that the new leadership of both companies was selected through a credible process that is consistent with corporate governance best practices . ” said the investor. Existing management should remain in place until a decision is made on new leadership, Elliott said.

A GlaxoSmithKline spokesperson said the issues Elliott identified in his letter were not new and that the company’s transformation program was designed to address those legacies and more.

“We believe our shareholders support this strategy and focus on GSK executing it without distraction or delay,” said the spokesman.

Elliott did not disclose the size of its stake in GlaxoSmithKline, but said it had established a “significant position” in the company.

The investor said GlaxoSmithKline should incentivize greater performance and ambition, improve profitability while investing more in research and development, be open to value-maximizing pathways, and maintain the flexibility of its vaccine and pharmaceutical operations. It also states that GlaxoSmithKline’s vaccines and pharmaceutical operations should not be fully integrated as they are largely separate from one another in their manufacturing processes and marketing.

As part of those deliberations, Elliott said GlaxoSmithKline should remain open to deviating from its baseline and considering a sale of its consumer healthcare business, which generates nearly a third of the company’s sales. This would allow the company to accelerate R&D investments, pay off debt and return remaining proceeds to shareholders, the company said.

“Any strategic opportunity to sell [consumer healthcare] carefully followed and accompanied by a clear plan for how GSK will use the proceeds, “said the investor.

Last week, the company announced that it would split its Consumer Healthcare business in mid-2022 by splitting at least 80% of its 68% stake in the business to shareholders. GlaxoSmithKline said it would keep up to a fifth of its stake in the new consumer health company – which is expected to be listed on the London Stock Exchange – and receive a special dividend of up to £ 8 billion ($ 11.06 billion).

The UK drug maker also pledged last week to accelerate sales and adjusted operating profit growth over the next five years, aided by new vaccines and specialty drugs.

GlaxoSmithKline’s shares rose 0.5% to 1,427 pence at 0923 GMT.

Write to Adria Calatayud at adria.calatayud@dowjones.com

source https://dailyhealthynews.ca/elliott-calls-for-board-changes-at-glaxosmithkline-ahead-of-consumer-healthcare-spinoff-update/