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GSK shares rise on sales beat - as it calls in top US scientist to fend off activist attacks

·4 min read
GSK House during London 2020 (GSK)
GSK House during London 2020 (GSK)

GSK has recruited a top US geneticist to strengthen the scientific credentials of its board as it circles the wagons around under-fire CEO Emma Walmsley.

The FTSE 100 drugs-maker has hired Dr Harry ‘Hal’ Dietz, a lecturer at leading research college The Johns Hopkins University and a former president of the American Society of Human Genetics, as a non-executive director.

He will also sit on the science committee, scrutinising research, performance and acquisitions at the new vaccines company.

Under pressure: GSK chief Emma Walmsley (GSK)
Under pressure: GSK chief Emma Walmsley (GSK)

The appointment is the £80 billion pharma giant’s latest attempt to defuse criticism from activist investors, led by US hedge-fund Elliott, as it prepares to demerge into two separately listed firms.

The fund, which has built up a fearsome reputation and a “significant” stake in GSK, has called for the outright sale of the nascent consumer healthcare arm — which makes Sensodyne, Advil and Panodol — and a shake-up at the top of the dedicated vaccines and drug unit “New GSK”.

That includes making Walmsley —who spent 17 years at L’Oréal and does not have a formal science background — reapply for the job heading up the pharmaceuticals and research arm.

GSK has rejected Elliott’s demands and also dismissed calls from another activist investor Bluebell for the removal of both Walmsley, below, and chairman Sir Jonathan Symonds.

Dietz — who founded biopharma Blade Therapeutics and has 282 published scientific papers to his name — will be paid a one-off fee of £40,000 alongside a salary of £125,000.

Symonds said: “Hal’s expertise means he is perfectly placed to provide the insight and challenge we need as GSK moves further into developing next generation medicines and vaccines.”

The announcement came as GSK unveiled sales of £9.1 billion in its third- quarter results, beating analyst expectations of £8.7 billion.

Sales of blockbuster shingles drug Shingrix recovered from a pandemic slump, rising by 41% to £502 million and lifting group vaccine sales to £2.2 billion.

Whilst this is slower than more optimistic forecasts, it was balanced out by sales worth £209 million of Covid-19 therapies such as Xevudy.

Pharmaceuticals revenue was up 5% to £4.4 billion led by a 34% rise in sales of cancer therapies.

Consumer sales were up 3% to £2.5 billion.

GSK is preparing to move 800 staff from its landmark HQ in Brentford, west London , to a new campus for the consumer division and will appoint a chair to head up the new company in the next quarter.

Walmsley said: “GSK has delivered another quarter of strong business performance, with double-digit sales growth in pharmaceuticals and vaccines, increased momentum in consumer healthcare, and continued discipline on costs.

“This has allowed us to improve our full-year guidance and, alongside the progress in strengthening our research and development pipeline, reinforces our confidence in the outlook for a step-change in growth and performance in 2022 and beyond.

“We also continue to make excellent progress towards unlocking the value of consumer healthcare through a successful demerger in mid-2022.”

Sebastian Skeet, healthcare analyst at Third Bridge, said: “Despite a quarter in which pipeline pains have persisted and activist investors continued to question Dame Emma Walmsly’s suitability as CEO, GSK has improved full year EPS guidance.

“In the near term Investors will focus on further shingrix recovery and flu vaccine sales, the latter of which will be particularly interesting as we head into what some experts have called a ‘twindemic’ of a concurrent strong influenza season and a spike of Covid cases.”

“The Consumer Health spin-out is a key focus point for investors and, as of late, private equity too. With GSK having committed to evaluating any options that would boost shareholder value, all eyes are on how this plays out”

Laura Hoy, analyst at Hargreaves Lansdown, said: “GlaxoSmithKline managed to deliver an upside surprise for the third quarter with revenue and profits both posting double-digit increases.

“The results had merit, but debt levels are a concern, as they have been climbing uncomfortably higher each quarter.

“The group’s a long way off from generating enough cash to cover its dividend payments and that’s chipped away at the balance sheet. The upcoming demerger could help with this, but execution remains a risk.

“New GSK will house both of the group’s fastest growing segments, but R&D spending in these areas cost the group over £1bn in the past quarter. This can quickly start to pile up alongside dividend payments if pipeline approvals don’t progress as expected.“

Shares rose 3.5% to 1485.0p.

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