These days, the words ‘British vaccine maker’ are typically followed by the name ‘AstraZeneca’ (AZN).
Little wonder, perhaps. The pharma giant’s coronavirus inoculation, developed in partnership with Oxford university, is one of just three shots to have been cleared for use in the UK. Yet, AstraZeneca is not the only jab-maker listed on the FTSE 100. Earlier in the pandemic, GlaxoSmithKline (GSK) was seen as a key contender in the vaccine race.
Admittedly, GSK suffered a setback in December when it revealed that trials conducted with partner company Sanofi (FR:SAN) had demonstrated an “insufficient response in older adults”. But progress has been more encouraging in recent weeks. On 17 May, Sanofi and GSK announced that their vaccine candidate had triggered strong immune reactions in mid-stage studies. Just a day later, GSK said that another jab it had worked on – this time with Canadian company Medicago – had also delivered positive phase two results. And on 21 May, the European Medicines Agency (EMA) issued a “positive scientific opinion” on a drug developed with Vir Biotechnology (US: VIR) for the early treatment of Covid-19.
Activist pressure
Still, GSK has failed to enthuse the market. Its shares are down 2 per cent since the start of 2021. Moreover, they have slipped 18 per cent since chief executive Emma Walmsley took the helm in April 2017. Back in 2018, the group announced a deal with US group Pfizer (US:PFE) to create a new consumer healthcare business in which GSK would retain a majority stake. The idea was that the transaction would also allow GSK to create a global pharma and vaccines company with a strong focus on research and development.
But not everyone is satisfied with the rate of progress at GSK. As reported by the Financial Times last month, activist investor Elliott Management has built up a “multibillion-pound stake” in the company at a time when some investors are dissatisfied with its performance under Walmsley’s management.
Criticism of Walmsley has not been kept behind closed doors, either. Last week, David Cumming, chief investment officer for equities at Aviva (AV), told BBC Radio 4’s Today programme that “’stay as we are’ is not an option” for GSK. He added that “the jury is still out on [Walmsley’s] future and she’ll have to demonstrate a more positive view to shareholders in terms of her leadership if Elliott’s to be kept at bay”.
Alongside GSK’s quarterly numbers last month, Walmsley said that “we continue to deliver on our strategic priorities and remain very focused on creating significant value for shareholders with the launch of two new global companies next year”. That observation came as the group posted an overall sales decline of 18 per cent to £7.4bn. Revenues fell 50 per cent for its shingles vaccine as healthcare resources were redirected during the Covid-19 crisis.
The chief executive is due to host a virtual investor update on 23 June, which GSK says will “provide a clear view of the strategy for New GSK” and “its outlook for growth”. It remains to be seen how far the group placates its sceptics.
In any case, shareholders' concerns have reportedly echoed through the corridors of Westminster. According to The Times, the government fears a takeover of GSK amid the uncertainty sparked by Elliott’s involvement, and has asked ministers to keep an eye on the situation.
Broader investor dissent
That said, GSK is not alone in facing investor dissent. Just this month, nearly two-fifths of votes at AstraZeneca’s AGM opposed a pay plan which has materially bumped up boss Pascal Soriot’s bonus potential. On the face of it, while the vaccine noise may be hogging the headlines right now, shareholder engagement may become a far greater aspect of Big Pharma’s future.
