Tension builds at GlaxoSmithKline as activist investor Elliott plots CEO Walmsley's removal, vaccine split: FT

Tension is building at GlaxoSmithKline in the run-up to a closely watched investor day scheduled for Wednesday. While CEO Emma Walmsley is slated to lay out her plan for a “new GSK,” her very position at the company may come under question.

Activist investor Elliott Management has been able to rally some support for a management change at GSK, namely replacing Walmsley, the Financial Times reported, citing a top 20 shareholder.

Not only does Elliott want Walmsley off the pharma leadership, it’s also rooting for splitting GSK further by hiving off its vaccine unit, another large shareholder told the newspaper. The British pharma is already planning to spin off its consumer health joint venture with Pfizer.

In April, it was reported that Elliott took a major stake in GSK, but the investment firm has never made its intention clear publicly. Since then, Elliott has called on GSK shareholders, raising doubts about whether Walmsley is the right person to lead the remaining GSK, The Mail previously reported.

Now, the idea of a new management is attractive to some investors, the first shareholder told the FT. “Her background is in consumer rather than healthcare, which may be why,” he reportedly said.

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Wednesday’s investor event will be the first time Walmsley outlines GSK’s long-term plan beyond the consumer health separation. Questions will likely focus on the potential of GSK’s drug and vaccine pipeline, especially in oncology, where Walmsley has invested heavily.

The PARP inhibitor Zejula, the centerpiece of GSK’s $5.1 billion acquisition of Tesaro, still lags way behind AstraZeneca and Merck & Co.’s rival drug Lynparza. The company’s oncology ambitions suffered a key setback earlier this year as Merck KGaA-partnered bintrafusp alfa failed to top Keytruda in non-small cell lung cancer.

As pharma watchers question GSK’s long-term prospect, Luke Miels, GSK’s chief commercial officer, said people are underestimating the company both for its marketed products and its R&D projects.

“I think what we need to do is to give (investors) more confidence on commercial execution and give them more confidence on the quality of the assets in the pipeline,” Miels said, as quoted by Reuters.

RELATED: GlaxoSmithKline CEO Walmsley snares key investor backing for upcoming fight with activist Elliott: report

There’s apparently a lot of convincing to do at the upcoming meeting now that Elliott has sown the seeds of doubt.

Miels compared GSK with its British compatriot AstraZeneca, which has enjoyed huge success in oncology with blockbuster cancer drugs such as Lynparza and lung cancer med Tagrisso.

“I think these things take time, and then I can remember meeting investors with Astra and being challenged about progress in oncology,” he told the FT. “I think it’s about picking the right assets and moving forward. And we’ve got a number of opportunities coming through.”

Spinning out the consumer health franchise into a new public company through an IPO could give GSK much-needed cash for R&D efforts and deal-making. It can put GSK “in a stronger position to execute on larger transactions should the opportunity or need arise,” Louise Pearson, an analyst at Redburn, told Reuters.

While some GSK shareholders may have been swayed by Elliott, some of the largest investors have reportedly pledged their support for Walmsley’s leadership. BlackRock, GSK’s largest investor, along with its fifth-largest shareholder Dodge & Cox, and U.K.’s Royal London have contacted GSK Chairman Jonanthan Symonds to back up the current team, The Mail reported in May.

And investors who remain on the fence will likely be looking to Walmsley-led management’s presentation on Wednesday to gauge GSK’s future. One large asset manager told the FT that they were “very much looking forward” to what Walmsley has to say.