GSK could split amid pressure from investors – report

GlaxoSmithKline’s chairman, Philip Hampton, may be considering splitting the company amid pressure from top investors to separate the company into consumer, pharma and vaccines divisions.

According to an FT article several large shareholders urged Hampton and the company board to transform the UK pharmaceutical giant to a standalone pharma and vaccines company and spinning off the consumer unit.

Investors have been calling for a break-up for years, and if GSK’s management team finally takes the plunge the change could be implemented within the next two to three years.

One of the top 10 shareholders quoted by the FT said: “I have had these conversations [with Sir Philip]. The logic of [splitting] the business is pretty clear… The financial dynamics of consumer and pharma are pretty different.”

Another of the substantial investors stated that the splitting the business has been on a cards for a long time with questions such: “What are you? Are you pharma? Are you consumer goods? There is potential for thinking that a spin-off would make sense… We have spoken to the board about it.”

Samuel Johar, chairman of Buchanan Harvey, a board advisory firm, said investors “just think something has to be done because the status quo is not working”.

Sarah Spencer, GSK’s spokeswoman commented in a statement on Friday: “We believe the three business structure of the group offers significant opportunities in the current healthcare environment and provides the group with more stability to our earnings and helps in free cash flow generation.”

“But as we have consistently said this is subject to each business continuing to perform competitively and having access to capital.”

In June this year, GSK completed the buyout of 36.5% consumer healthcare shares from Novartis for $13 billion, regaining the full control of this side of the business after the last three years of joint venture.

GSK also sees a large growth potential of consumer sector and have set an increased margin target to achieve by 2022.

The market also reacted to the FT report. GlaxoSmithKline shares traded in the US jumped on Friday as much as 4% during a day to close trading sessions with a 2.9% increase and the end value of $41.87.

The company made a second announcement on Friday, stating its malaria drug tafenoquine got rewarded with accelerated FDA approval becoming the first ever single-dose medicine to counter P. Vivax malaria relapse.

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