Elliott Management Fires the Opening Salvo

Elliott Management has finally revealed its plans for GlaxoSmithKline after months of hidden planning. To save GSK from what it calls “years of under-management,” the activist investment group is seeking significant reforms at the drugmaker. Elliott called for an overhaul of GSK’s board of directors in an open letter (PDF) to GSK Chairman Jonathan Symonds, calling for directors with biopharma and consumer health experience.

However, adding more board members is a means to an end. The investment firm wants GSK and its upcoming consumer health spinoff to have a “fit-for-purpose” board that selects “the greatest possible leadership.” The demand is a de facto challenge to GSK CEO Emma Walmsley’s present leadership. Elliott Management has been rallying investor support to remove Walmsley after the separation since allegations surfaced in April, the firm had purchased a prominent position in GSK.

Elliott is alleged to have stated that she would instead lead the departing consumer health company than the remaining GSK, which is focused on pharmaceuticals and vaccines. Walmsley, for one, has stated that she expects to continue to lead GSK. However, she described herself as a “change agent” and a “business leader” during a press conference held ahead of last week’s investor day.

Walmsley stated at the investor event that GSK’s target is to achieve annual sales growth of 5% over the next five years, with revenues of £33 billion ($46 billion) by 2031. That isn’t even taking into account the impact of any future business development. Walmsley also disclosed GSK’s proposal to de-merge the consumer health franchise into an independent company listed on the London Stock Exchange next year during investor day. Instead, Elliott advised that GSK sell the company and utilize the revenues to support R&D, pay down debt, and buy back shares. Elliott also hinted that it might already have purchasers lined up.