Activist investor Elliott builds stake in GSK after fresh trial upset

Activist investor Elliott Management has built a significant stake in GlaxoSmithKline, after a poor run of clinical trial results this year raised questions about management’s strategy to turn around the company’s fortunes.

The news follows another trial disappointment this week, where GSK’s feladilimab, combined with Merck & Co’s Keytruda (pembrolizumab), came up short in a trial of patients with head and neck cancer.

GSK decided to stop enrolling patients on the phase 2 INDUCE-3 trial, discontinuing treatment with feladilimab and has also axed the INDUCE-4 phase 2 trial, testing feladilimab versus placebo in combination with Keytruda and chemotherapy.

Another high-profile failure this year was the lung cancer hopeful bintrafusp alfa, the focus of a deal worth up to $4.2 billion signed with Germany’s Merck KGaA.

But that failed in a late-stage lung cancer trial comparing it with Keytruda in January.

And despite its expertise in vaccines GSK has been beaten soundly by rivals such as AstraZeneca and Pfizer in the race to develop COVID-19 shots, with a joint project with Sanofi delayed after a reformulation late last year.

According to press reports Elliott Management has built a “significant” stake in GSK, leading to speculation that the investor will push for changes at the company.

Neither GSK or Elliott Management have commented on the stories, which sent the UK pharma’s share price sharply up yesterday.

Elliott was founded in 1977 by Paul Singer and its European business is run by his son, Gordon.

The firm has a history of pressing for changed in pharma companies it invests in, pushing for the sale of Alexion before it was bought by AstraZeneca late last year for $39 billion.

Last year Elliott pushed for changes at Ireland’s Alkermes, which announced a “Value Enhancement Plan” drawn up following “constructive dialogue” with the investor.

That plan included multi-year profitability targets, a cost-cutting drive, potential sale of assets and appointment of two new directors.

Any intervention from Elliott would come at a crucial time for GSK, which is preparing to break split off its consumer healthcare business under the leadership of CEO Dame Emma Walmsley.

Walmsley has also hired highly-rated R&D guru Hal Barron on a bumper pay package, who concluded 2020 with a deal-making frenzy to boost the company's pipeline.

With or without Elliott, it's clear that GSK needs a break with several phase 3 readouts looming including from a potential asthma drug, Blenrep (belantamab mafodotin) in third line multiple myeloma and its rheumatoid arthritis hopeful otilimab.