A proxy fight is gaining steam at GlaxoSmithKline. Buoyed by “widespread and strong” investor support, the company is hitting back at Elliott Management, which just yesterday attacked the leadership of the drugmaker’s CEO Emma Walmsley.
GSK’s board “strongly believes” Walmsley is the “right leader” for the British pharma after the upcoming consumer health spinoff. The board “fully supports” the steps she’s taking to improve performance, GSK said in a statement Friday.
To back up the position, GSK pointed to “widespread and strong support” from GSK’s “largest shareholders” for the goals Walmsley recently laid out. The company also cited “confidence in GSK’s leadership to deliver them.”
After Elliott published a 17-page open letter questioning the company's performance Thursday, GSK responded publicly Friday. In its activist campaign, Elloitt is calling for an overhaul of the GSK board to choose “the best possible leadership” for the remaining GSK and the outgoing consumer health business.
In its response, GSK noted that it had already appointed two new nonexecutive directors to the board in the last 18 months. The company intends to add new faces to the team ahead of the separation “to increase biopharmaceuticals and scientific experience.”
Before Elliott’s grand disclosure this week, reports emerged that it had been stoking doubts about Walmsley’s fitness for the top job among shareholders. The investment firm reportedly suggested that Walmsley should head the consumer health franchise, which she used to lead before climbing up the ranks to become CEO in 2017.
Top investors weren’t biting, according to reports. GSK’s largest investor, BlackRock, plus other key shareholders backed Walmsley before the public showdown, The Mail reported in May.
Meanwhile, the board is already close to appointing a CEO designate for the consumer health unit after “an extensive search and selection process,” GSK said on Friday.
At a closely watched investor event last week, Walmsley laid out her vision for GSK. The company plans to split the consumer health business through a de-merger next year, when at least 80% of GSK’s holding in the franchise will go to GSK investors.
Elliott is urging the company to take another course: The activist firm urged GSK to consider a sale to fund R&D, pay down debt and buy back shares.
GSK said it reached the de-merger structure because a “significant proportion" of GSK investors want to own the consumer health business rather than having to buy it again after the separation. That said, the board noted that it’s part of its fiduciary duties to evaluate any alternatives.
Another demand from Elliott involves complete autonomy for what it called the “crown jewel” GSK vaccines business. The drugmaker rejected the idea, arguing that the business has benefited from operational integration with the pharmaceuticals department in areas such as commercial operations and clinical development for years. The company plans to continue with the integration and “does not believe it would be appropriate to have separate divisional reporting,” GSK said.
In an email Friday, an Elliott spokesperson said the investment shop doesn’t have any comment on GSK’s response at this time. Given how the activist investor has previously pushed for changes at other biopharma companies such as Allergan and Alexion, this won’t likely be the last time we hear about the clash.