[Ip-health] Investors call for surgical strike on GSK

[Michelle Childs]

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[ Picked text/plain from multipart/alternative ]
http://observer.guardian.co.uk/business/story/0,,2160446,00.html
Investors call for surgical strike on GSK


Shareholders want new boss to streamline firm

Richard Wachman, city editor
Sunday September 2, 2007
The Observer

GlaxoSmithKline, the UK drugs giant, faces a shareholder revolt over
its dismal share price performance. Anger has spilt into discussions
between investors and chairman Sir Christopher Gent over who should
succeed chief executive Jean-Pierre Garnier. He is due to retire in
May 2008.

GSK's big institutional shareholders have held meetings with Gent and
told him in no uncertain terms that Garnier's successor should be
someone who is prepared to undertake a fundamental overhaul of the
company and consider a radical streamlining of its operations,
including a possible break-up.

The company, formed out of a merger between Glaxo and SmithKline in
2000, has been swept up in a tide of shareholder discontent with
questions being asked about whether the giant pharmaceutical
companies - Big Pharma - operate effectively and efficiently.

An analyst said: 'GSK is facing a backlash from investors who want
the company to consider whether large, and sometimes cumbersome
operations, such as GSK, are best placed to come up with new medicines.'

Shareholders want Garnier's successor to look at all options. These
include: demerging manufacturing and/or the research and development
arms, shrinking the firm's massive sales force, and offloading non-
core operations such as the drinks subsidiary which owns brands
including Ribena and Lucozade.

One institutional investor says: 'What we are telling the chairman is
that with the industry facing a regulatory clampdown that makes it
more difficult to get new medicines approved, GSK should look at ways
to release shareholder value. The status quo is no longer an option.'

Another shareholder, who spoke on the basis of anonymity, says: 'GSK
should recognise that Big Pharma is broken and needs to be fixed.
Garnier's successor needs to take that on board. It's no good
producing more of the same.'

Four potential candidates are jostling for the top job: David Stout,
president of pharmaceutical operations; Chris Viehbacher, head of the
US side, who is thought to be the frontrunner; Andrew Witty, the
British head of European operations; and Russell Greig, head of the
international division.

GSK's shares traded at close to =A315 in early 2000 against a Friday
close of =A312.79. The stock price has been hit by safety fears linked
to Avandia, one of its leading drugs, worries about generic
competition and concern about a possible dearth of new blockbuster
medicines in GSK's R&D pipeline.

Neil Ransome, head of the pharmaceuticals department at
PricewaterhouseCoopers' corporate finance arm, said recently:
'Evidence that mega-mergers in this sector improve the rate of
discovery of new drugs isn't compelling.'

Experts say the industry could move towards a model where companies
farm out R&D to small biotech companies.

Analysts Citigroup shook the market earlier this year with research
suggesting breaking up GSK could boost the value of the firm by half
and enable the company to return =A320bn to shareholders.





Michelle Childs
Head of European Affairs
Knowledge Ecology International
michelle.childs@cptech.org