Sign up USA
Proactive Investors - Run By Investors For Investors

GlaxoSmithKline considering business break-up following investor pressure - FT report

The newspaper said GSK’s chairman Philip Hampton has been in discussions with the FTSE 100-listed group’s biggest shareholders about the creation of a standalone pharma and vaccines company in the medium term
GSK boss Emma Walmsley
GSK is expected to outline its new approach for the division in the coming week when it reports second-quarter results

GlaxoSmithKline plc (LON:GSK) is considering breaking-up its businesses, according to a report in the Financial Times at the weekend, following investor pressure for the blue-chip drug maker to spin-off its consumer division.

The newspaper said GSK’s chairman Philip Hampton has been in discussions with the FTSE 100-listed group’s biggest shareholders about the creation of a standalone pharma and vaccines company in the medium term. The move could happen within two or three years, the report added.

READ: Bidding war brewing for GSK’s Indian Horlicks division, with Coca-Cola, Nestle and Kraft all reportedly interested

One of the company’s top ten shareholders, whom the FT did not name, acknowledged having conversations with the GSK chairman, adding that shareholders “don’t quite believe in the company.”

A GSK spokesman said the group’s priority is to improve the performance of its pharmaceutical business, especially research and development, reports added.

The company is expected to outline its new approach for the division in the coming week when it reports second-quarter results on Wednesday.

Last year, GSK’s chief executive Emma Walmsley announced a wide-ranging overhaul designed to narrow the focus of drug research and improve returns in the core pharmaceuticals business.

In April, GSK said it was divesting its rare disease gene therapy drugs to private biotech company Orchard Therapeutics.

UBS cautions on dividend cover

In a note to clients regarding the FT report, analysts at UBS commented: “Consumer accounts for c20% of GSK group EBIT and, whilst it is the slower growing part of the business, it tends not to be attributed a consumer-like multiple (in general Consumer assets within pharma companies do not get consumer-like multiples)."

They added: “On paper hence a break-up would seem to make sense, but we caution that the dividend cover as well as the current repositioning of GSK would not allow for this for a few years to come.”

UBS repeated a ‘buy’ rating and 1,600p price target on GSK. In early morning trading, GSK shares were 0.4% higher at 1,555.2p.

 -- Adds analyst comment, share price --

View full GSK profile View Profile

GlaxoSmithKline plc Timeline

Related Articles

3d rendering of an antibody
July 24 2018
It is teaming up with Bach BioSciences, a company commercialising the research of William Bachovchin, a professor at Tufts University School of Medicine, Boston
Graphic of person pointing to different parts of the body
May 14 2018
Paradigm’s share price has increased more than 60% in the last month and it was up more than 12% on Friday.
Collagen testing
Fri
Since reporting its full-year results on July 10, the AIM-listed shares have rallied over 38% in the past month to 3.65p currently, taking year-to-date gains to a third
Copyright © Proactiveinvestors.com, 2018. All Rights Reserved - Proactive Investors North America Inc., Proactive Investors LLC

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use