Star Investor Neil Woodford Pushes for GlaxoSmithKline to Split Up—Again
January 8, 2016
By Mark Terry, BioSpace.com Breaking News Staff
He’s back at it again. In October 2015, Neil Woodford, of Woodford Investment Management, met privately with Sir Philip Hampton, the chairman of London-based GlaxoSmithKline , urging him to split up the company.
On Monday, Woodford conducted an interview with Radio 5 live’s Wake up to Money broadcast, again pushing for the break-up of the pharmaceutical giant. In part, Woodford said that GSK is “like four FTSE 100 companies bolted together.” And he went on to say that GSK doesn’t “do a particularly good job of managing all of the constituent parts.”
Woodford founded Woodford Investment Management ILP in April 2014 and launched Woodford Patient Capital Trust in April 2015. Before that, he headed Investco Perpetual Income and Invesco Perpetual High Income fund, which managed assets of £10.36 billion and £13.64 billion in assets, respectively. He currently managed about £14 billion client funds.
He argued in the past that GSK’s stock underperforms and is, essentially, worth more broken up that it is operating as it is. Woodford owns about £35 million of GSK stock.
Woodford’s interview was wide-ranging, discussing his opinions on the Chinese economy (bad), the UK trade balance (“awful”), the Greece economy (“never-ending financial crisis”), and whether Britain should stay in the European Union (“no convincing economic argument”).
And, of course, about GSK. “We’d like the business to recognize that it should focus on certain activities in the portfolio and do them better than they have done in the past, demerge the bits they haven’t managed particularly well and let other people who specialize in those activities run those businesses.”
In the past, Woodford has suggested GSK split off its HIV business, ViiV, its consumer healthcare division, and Stiefel, its dermatology unit.
GSK has been the target of acquisition rumors over the last year, with possible buyers floated as Pfizer Inc. , Novartis , Roche Holding AG (RHHBY) or Johnson & Johnson . Of course, CNBC Mad Money’s Jim Cramer called for J&J to split into three companies back in July 2015. “Three different businesses under the same roof—pharmaceuticals, consumer healthcare products and medical devices,” Cramer said. “That’s a pretty diverse product line with virtually no overlaps. As we’ve seen so often in the past, I think these divisions could do much better separately than as one combined company that is confusing to manage or even to understand. To me JNJ is a textbook example of the parts being worth more than the whole.”
Which appears to be the objective of some companies lately. Pfizer’s recent acquisition of Allergan is pretty much predicated on the future merged company’s breaking into two or more companies, one focused on development, the other focused on established drugs. DuPont and The Dow Chemical Company are merging with plans to split the merged company into three independent, publicly traded companies. And Bayer AG recently spun off its MaterialScience plastic unit into a publicly traded company renamed Covestro.
Although breaking up GSK appears to be a favorite topic of Woodford’s, there is some speculation that his recent push is related to an upcoming JPMorgan Healthcare Conference starting Monday in San Francisco. GSK’s chief executive officer, Sir Andrew Witty, is expected to try and persuade analysts that his turnaround plan for the company is going well, and that, according to Invezz, “growth in new drugs, particularly HIV treatments, is starting to outweigh a decline in sales in GSK’s flagship respiratory drug Advair.”