GSK consumer business spun off from Elliott Management after investor pressure


View of the headquarters of the British pharmaceutical company GlaxoSmithKline in West London.

Ben Stansall | AFP | Getty Images

LONDON – UK pharmaceutical giant GlaxoSmithKline faces a crisis meeting with investors on Wednesday after announcing a new strategy for the next decade focused on splitting off the company’s significant consumer products business.

The new core Drugs and Vaccines division, which CEO Emma Walmsley referred to as the “New GSK”, has set sales growth of 5% and earnings growth of 10% through 2026. The separation should take effect in mid-2022.

GSK is also targeting sales of more than £ 33 billion ($ 46.2 billion) by the end of the decade, which the company hopes will offset the loss of exclusivity to the HIV drug dolutegravir in 2028.

Investors have reacted positively to the plans so far, with GSK shares up 1.1% by afternoon trading in Europe.

However, Walmsley will need investor backing at the company’s Capital Markets Day, as he was most recently under pressure from US activist investor Elliott Management. The virtual session begins on Wednesday at 2 p.m. London time.

Walmsley told CNBC’s “Squawk Box Europe” on Wednesday that the divestment was a “step for growth” and the culmination of a four-year transformation plan aimed at addressing “perennial underperformance” in the business.

“This growth is all about a portfolio of high-quality vaccines and specialty drugs, and that is really at the heart of New GSK’s strategy, which is focused on disease prevention and treatment,” she said.

“It’s about presenting New GSK as a growth company with new ambitions for shareholders, but also about our chance to have a positive impact on the health of 2.5 billion people over the next ten years.”

The separate consumer health business, which includes brands like Panadol and Sensodyne, will be spun off, with “at least 80%” of the value returned to shareholders, while GSK plans to hold 20% temporarily and sell it at a later date.

The new GSK will cut its dividend to 45p per share in 2023, compared to the 80p offered by GSK this year, while the new consumer division will offer 55p.