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Walmsley needs a fast-acting remedy for GSK’s malaise

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<span>Photograph: Bloomberg/Getty Images</span>
Photograph: Bloomberg/Getty Images

Few companies fit with the national zeitgeist quite like drugs giant GlaxoSmithKline. But few face the cocktail of pressures Dame Emma Walmsley, chief executive at Britain’s second-biggest drugmaker, is wrestling with. In post since 2017, she is under immense pressure from one of the most aggressive investors on the planet, New York-based hedge fund Elliott Management – famous for chasing Argentina over its sovereign debts for more than decade.

GSK, known for products ranging from HIV treatments to toothpaste, recently won plaudits when its malaria vaccine was approved by the World Health Organization. Chancellor Rishi Sunak boasted at the Tory party conference this month about building the UK into a “science superpower”. That vision depends on companies such as GSK converting its pipeline into drug successes.

But when Walmsley unveils third-quarter results on Wednesday, the focus will be on whether the 52-year-old can finally add sparkle to the FTSE 100 giant’s lacklustre share price.

Walmsley, appointed to revive GSK after a “lost decade” under her predecessor, Sir Andrew Witty, has vowed to turn the company around. But almost halfway through her own decade, in which the share price has declined by 14% to £14.23, she needs to start delivering.

She has acknowledged that “what makes you vulnerable is perennial underperformance”, but also claims to be confident that, after an overhaul of GSK culture and a 30% increase in development spending, the turnaround will begin next year.

The company desperately needs some pipeline successes to breathe life into a share price that's down by 14%

After the disappointment of GSK’s tie-up with France’s Sanofi to develop a Covid vaccine, investors will be keen to see signs of progress on the drug pipeline, eight months before the planned split of the company’s consumer healthcare division away from the pharmaceuticals and vaccines business, the latter becoming “New GSK”. It will be the biggest shakeup since the merger of GlaxoWellcome and SmithKline Beecham in 2000.

Total turnover is expected to have risen to £8.7bn – from £8.6bn a year earlier – in the three months to September. Analysts are forecasting £6.3bn for New GSK and £2.4bn for the consumer arm. Profit before tax is forecast at £2.1bn, up from £1.7bn.

Promising products in the firm’s pipeline of 63 potential medicines and vaccines include a respiratory syncytial virus (RSV) vaccine for older adults; GSK is expected to go head to head with US rival Pfizer in publishing late-stage clinical trial data next year. Final data is expected soon on Daprodustat, a treatment for renal anaemia. And Cabotegravir, the main ingredient in GSK’s monthly HIV injection Cabenuva, is being tested as a preventative.

The company has had setbacks in its cancer portfolio and needs some pipeline successes to breathe life into its share price – and achieve a sales target of £33bn by 2031 for New GSK.

Elliott, run by the belligerent Paul Singer, took a sizeable stake in GSK in the spring and has since clamoured for boardroom changes and a swift sale of the consumer division.

Along with the much smaller London hedge fund Bluebell Capital Partners, Elliott is demanding that Walmsley reapply for her job ahead of the consumer split, a demand she and the board have resisted. Bluebell has gone on to call for the departure of the chairman, Sir Jonathan Symonds, as well.

Walmsley does not have time on her side. It took AstraZeneca’s boss, Pascal Soriot, six years to revive that company. With Elliott on the scene, Walmsley needs to deliver sooner than that.

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