Glaxo chief’s great gamble
ANITA Brookner’s novel The Latecomers tells how one of the characters is sitting with her father in his last hours. ‘Father. Tell me what to do,’ she says. After an immense effort, he replies: ‘ Don’t sell Glaxo,’ and falls back, dead.
GlaxoSmithKline is now known as GSK but is still one of Britain’s, and the world’s, leading pharmaceuticals companies.
It is in the throes of a multi-billion pound overhaul under its chief executive, Emma Walmsley.
But does the advice of the fading Mr Hardy in Brookner’s fiction hold true?
When Walmsley presents GSK’s half-year results this week, along with an update on research and development by Dr Hal Barron, the company’s chief scientific officer, investors will be looking for signs.
The success or otherwise of her shake-up has wider ramifications because the company is key to the UK’s success in cutting
edge pharmaceuticals, a sector where we have a strong record for punching above our weight.
Shares in GSK are at a similar value today as they were when Walmsley took over in 2017. At AstraZeneca, by contrast, they are up strongly over the same period, by around a third.
Walmsley, however, is at the foothills of her journey – and will be aided by Jonathan Symonds, a former finance director at Astra, who is joining as chairman.
She has already done three big deals since stepping into the corner office just over two years ago, kicking off with the buy out in March last year of a £9.2bn stake owned by Swiss pharma company Novartis in a consumer healthcare joint venture.
December was a busy month: Walmsley went Christmas shopping and bought US cancer drug business Tesaro for £4bn, a big bet on oncology treatments. She has also invested £ 240m in a genetics firm, 23ANDME, as part of her bid to take the company back to being an innovator at the cutting edge of new drugs development.
HAL Barron, seen as a rock star of the industry, is heavily into the use of artificial intelligence to discover new drugs and develop them more quickly. More big names have been and are being hired, as GSK seeks to take on the world’s top scientific talent.
Most dramatic of all, however, is Walmsley’s plan for an £80bn break-up.
The idea is to spin off the consumer health division – assuming a deal to merge it with
the equivalent business at Pfizer is approved by the regulators - and float it on the London Stock Exchange, where it will be a FTSE 100 company in its own right.
Is the split the right thing to do? Although some shareholders have agitated for it, one potential problem is that the consumer products provide a stable source of income to counterbalance the more volatile flows from the drugs side. And size brings some protection from predators. A smaller GSK drugs business will be much more vulnerable to a takeover by one of the US players, which would be very bad for Britain.
There are question marks over the dividend, given that R&D is the main priority: it is likely to stick at 80p a share for the full year. And there are questions over whether Walmsley can get enough income flowing in from vaccines such as Shingrix and from established drugs whilst the new ones come through.
Some investors fear she is doing too many deals too fast and will end up with indigestion. But anyone who doubts the boldness of female business leaders clearly has never met Ms Walmsley.