Activist Investor Elliott Targets GSK

16.04.2021 - Activist hedge fund Elliott Management, also known as Elliott Associates or Elliott Advisers, has a new target – GlaxoSmithKline (GSK). Over the past decade, the fund has gone after chemical companies DuPont, Bayer and most recently Akzo Nobel, with mixed results.

According to the newspaper Financial Times (FT), the hedge fund has built up a multibillion-pound stake in the UK’s largest drugmaker, setting up a potential battle over the company’s future after it has underperformed peers and lagged in the race to develop a Covid-19 vaccine.

The fund’s strategy is to pack a company’s board and align the members with its own targets, even toppling the CEO if it deems necessary. Its moves at GSK come as some shareholders reportedly have become unhappy with the management strategy of the company’s CEO. Emma Walmsley is driving forward plans to break up the company from 2022. GSK’s consumer health business has been separated from pharma and vaccines and brought into a joint venture in preparation for the move. 

Reports from the stock market say the value of the pharma giant’s shares has fallen 14% since Walmsley stepped into the CEO’s spot in April 2017. Some shareholders, the FT noted, “have privately expressed concerns” over the British company’s performance, pointing to disappointments in its drugs pipeline, raising questions about its allocation of research and development spending and drawing unfavorable comparisons with AstraZeneca, whose shares have risen by 49% per cent in the same timeframe.

While GSK’s plans to produce a Covid-19 vaccine together with France’s Sanofi, have stalled, AstraZeneca has a product on the market. However, some analysts believe the position of the latter player’s chief may be shaky, due to the negative attention the blood clotting incidents seen with its vaccine have drawn. Amid the pandemic, Pascal Soriot has remained in Australia, quarantined with his family.

Elliott, which the newspaper said typically uses derivatives to build stakes in target companies, wagered a multi-year campaign to get US rare disease specialist Alexion Pharmaceuticals – in which it held a stake – to sell itself to take advantage of soaring biotech stocks. In December 2020, AstraZeneca bought the company for $39 billion.

Author: Dede Williams, Freelance Journalist