Activist Elliott, in investor call, questioned whether GSK CEO Walmsley is the best fit for the job: report

GlaxoSmithKline appeared to dodge a potential shakeup last week when activist investor Elliott Management said it wouldn't angle for a sale or push the company to slash R&D spending. But now the activist firm is reportedly raising questions about the British pharma's top executive.

In private talks with Glaxo shareholders, Elliott has reportedly questioned whether CEO Emma Walmsley is the best fit to lead GSK long term, The Mail on Sunday first reported.

The hedge fund acquired a multi-billion pound stake in GSK last month. While it's kept its plans close to the vest, some investors fear Elliott will ramp up the pressure on GSK ahead of an investor event in June, when Walmsley is due to lay out her vision for the drugmaker, including a roadmap for a planned spinoff of the company's consumer health business.

In a private call, Elliott had "queried whether [Walmsley] was the best person for the job," one shareholder told The Mail.

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"My view is [Elliott] does want to change the leadership, and it wouldn't be surprising," another shareholder predicted. "[Elliott's] view and the market's view is that both the consumer business has underperformed—although it's improving now—and the pharmaceutical business is underperforming. And Walmsley has been there for four years."

The British Big Pharma has weathered its share of R&D setbacks over the past year, including a clinical trial flop for a late-stage cancer drug in January and continued difficulties on twin COVID-19 vaccine candidates—though the company recently turned out positive news on that front. Elsewhere, the pandemic took a major bite out of GSK's 2020 vaccine profit haul.  

Meanwhile, the looming consumer health spinoff "triggers a question over whether Emma is the right person to run it which is what investors and the board will be considering," another source close to GSK's board told the British outlet. 

Walmsley previously worked as a consumer executive at L'Oreal and has recently had to defend her top spot at GSK. “I’m not a scientist. I’m a business leader, and I believe that the priorities as the CEO are to set the strategy," she said during the company's first-quarter earnings call in April, as quoted by The Financial Times. 

At least one analyst—Alistair Campbell of the investment bank Liberum—agreed, telling The Mail he was "not convinced by the argument that GSK needs to be run by a scientist."

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The situation between GSK and Elliott has mostly played out behind the scenes, but the drugmaker scored some public backing last month. Major investors BlackRock, Dodge & Cox and U.K.’s Royal London pledged their support in a potential proxy brawl with Elliott. Meanwhile, the situation has reportedly put the U.K. on the defensive, too, with The Times reporting last week that the government had asked officials to monitor the situation over fears of a potential break up or sell-off.

A few days later, it emerged that Elliott would not push to sell the company's drugs and vaccines business or slash its R&D budget. The firm is reportedly supportive of GSK remaining in the U.K., too, after fears mounted that the investor could agitate a sale to a U.S. competitor.