When Elliott Investment Management came calling for the ouster ofEmma Walmsley, the chief executive officer of GSK Plcfound her remedy in a product almost 60 years in the making.
A vaccine breakthrough helpedWalmsleykeepher job afterthe hedge fund known for taking stakes in underperforming companiesarguedin 2021 thatBritain’s oldest drugmakerhad “lost its way.”Elliott’s broadsides have since then precededthe exits of at least five heads of multibillion-dollar firms, including Goodyear Tire & Rubber Co.’s Richard Kramer.
Three years later, Walmsley is stillat the helm and the drugmaker is finally showing signs of improvement. The formerL’Oréal SA executivealso appears to have won over Elliott, whose stake is now worth 30% more thanks to a recent uplift in GSK’s share price.
Rather than go to battle, Walmsley opened the door andlistened to the investor’s demands as she spun offpart of the company andstruckdeals to refill GSK’s medicine chest. Questions remain about GSK’s ability to come up with new drugs andlitigation over the antacid Zantac, and the stockstilltradesat a 40% discount to peerAstraZeneca Plc. Butinterviews with executives, shareholders and former employees paint a picture of a company thatmight have a shot at remaking its fortunes after turning the notorious adversary into a partner.
Walmsley wasat her most vulnerablewhen news of Elliott’s stake emerged, four years into her tenure as chief of the UK’s second-largest pharma company. The gap between GSK and Astraremained stubbornly large. Unlike its rival, GSKhad failed to develop atimelyCovid-19 shot. Its share performance lagged. Walmsley, who was promoted from the consumer-health division, faced misgivings about her lack of scientific know-how. The company confronted the expiration of patents on a keymedication, yet theacquisitions designed to bridge the gapwerecostly.
The one silver liningcame from the divisionthat had failed Walmsleyduring the pandemic: vaccines.The product that helped revive GSK prevents a common seasonal bug — respiratory syncytial virus, which was discovered in the 1950s. An early effort to create a vaccine backfired, and pharma companiesdidn’t resume research for many years. Under Walmsley’s leadership, GSK navigated eleventh-hour challenges to speed its shot to market.
Scientists embarkedon a decisive clinical trial just as Elliott amassed itsstake. Rival Pfizer Inc. was ahead in developing a similar shot.When GSK’sstudy results came in a year later, they showed almost83% efficacy—far ahead of the 50% to 60% benchmark that’s typical for flu vaccines. The UK companywon the race to market and itsshot nowoutsellsPfizer’sin its US home market.
“We came from being two years behind to being first out the gate,” Walmsley said in an interview, in a comment that verged on triumphant for the understated executive.
The daughter of a vice admiral in Britain’s Royal Navy,Walmsley is one of just a handful of female CEOs in the male-dominated world of pharmaceuticals. Her top management team is halffemale – a higher proportion than at Astra, Pfizer, Johnson & Johnson and Novartis AG.Julie Brown, a former executive at Astra, joined as chief financial officer last year.
Walmsleydeclinedto comment on her rapport with Elliott.But relations appear to have warmed since the investorcalled forher to reapply for her job in 2021.Walmsley and Chairman Jon Symonds are said to regularly meet with the firm’s management, including Gordon Singer, the son of the founder Paul, and portfolio manager Alex Chajecki, at GSK’s new headquarters in London’s Berkeley Square, at Elliott’s office a 15-minute walk away, or on Zoom.
Elliott hasn’t disclosed the size of its stake, making it difficult to judge the magnitudeof itsgains. The firmdeclined to comment for this article.
The challenge now for Walmsleyis to keep up the drumbeat of new medicines. Results of early research don’t translate into sales for years, often decades.
One top shareholder said that while commercial execution hasimproved, it’s unclear whetherGSK hassignificantly elevated its research and development processes. The investor, who declined to be identified, pointed toAstra’s steadierflow of new products.
Philip Hampton, GSK’s chairman when Walmsley became CEO, describedher as a good driver of performancebut expressedless certainty about her deal-making, which included the$5.1 billion takeoverof US biotech TesaroInc. to regain a foothold in cancer.
“It remains to be seen if those deals will produce shareholder value in time,’’ Hampton said in an interview. “I think the jury’s out on the longer-term issues around transactions and the pipeline.”
GSK shares have been weighed down by concern about US litigation over whether Zantac can cause cancer— something the company denies.Asell-off in 2022wiped out gains made since Walmsley’s arrival.
It’s taken the stock more than a year to recover, but this year it has gained 22%,surpassing Astra and Pfizer. GSK hascompleted its separationfrom the consumer-health unit, now called Haleon Plc. Sentiment is starting to shift, says Emily Field, an analyst at Barclays, in part because “RSV has been a phenomenal story.”
Thevaccine businesshas been part of the drugmaker’s identity since at least the 1960s, when a predecessor company sold an oral polio inoculation given on sugar cubes. In a 2021letter to Symonds and the rest of the board, Elliott described it as “one of the crown jewels’’ of the industry.
GSK’s success on RSV didn’t come easy. Theshot hit a snagwhenGSK had tohalt a trial in pregnant women, forcing itto concentrate on protecting older adults.Thepandemic complicated research, aslockdowns restrictedviral circulation. GSK used data modeling to predict when RSV would resurface.
Withevidence thatthe virus would likely return shortly after restrictions eased, GSK swiftly started afinal trial,six months before Pfizer. The lead allowed it to be the first to win US regulatory approvalin early May 2023.
Then began a battleto secure sales, which Christi Kelsey, head of commercialization for GSK’s vaccines, described as “hand-to-hand combat, so to speak, with a very formidable competitor.” GSK pulled off anothercoup by becoming the only supplier for the elderly to largest USpharmacy chain, CVS Health Corp., helping it scoop uptwo-thirds of the market share.
Walmsleyreplaced100 of GSK’s125 top managers in her first years at the helm. Chief Commercial Officer Luke Miels, poached from Astra shortly after Walmsleybecame CEO in 2017, gets credited for much of GSK’s recent commercial successes. Miels is sometimes also cited as her potential successor.
Chief Scientific Officer Tony Wood,who joined from Pfizer in 2017, says that when he arrived GSK was rooted in its past, focused on respiratory drugs andmedicines such as beta blockers to lower blood pressure. While Astra spent more than 25% of its sales on research and development, GSK’s share was a meager 14%. GSK is better now atprioritizing fundingfor promising projects, according to Wood.
Walmsley’sefforts ruffled feathers, and morale was initially low at GSK’s research hub in Stevenage, north of London. In an early gaffe thatupset some scientists, Walmsley said she would prevent them fromwasting time on pet projectsthat had little commercial potential.
Paul Peter Tak, a former chief immunology officer and global development lead at GSK, was among those who felt the shift under Walmsley’s leadership. Tak, who left in 2018 and is now CEO of Candel Therapeutics Inc., chooses his words carefully when assessing his former employer’s performance in early drug discovery — a key benchmark for drugmakers, which otherwise have to buy experimental medicinesto make up for their own labs’ shortages.
“It’s important to foster a culture of creativity and transformative innovation, and to get the balance right between freedom and accountability,’’ he said in an interview. “Many large pharma companies, including GSK, have struggled. That’s why productivity in biotech is on average higher in discovery of new medicines.”
At GSK’sStevenageresearch hub, scientists have embraced AI, machine-learning and functional genomics to try to improve the success rates of clinical trials. They are working on experimental treatments for chronic hepatitis B infection and a vaccine againstgonorrhea.
The initial signs are that Walmsley pulled off an unlikely victory.
When she spoke after the company’s latest earnings report in May,GSK had just boosted its full-year guidance, capping a quarter that surpassed estimates. Four analysts had upgraded their outlook for the company since January.
Walmsley insists she is unbothered by the pressure from Elliott and questions over her ability as a CEO. Part of the CEO’s job, she says, is to have the “courage of your convictions.”
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