October 26, 2015
By Mark Terry, BioSpace.com Breaking News Staff
Reportedly, London’s most influential fund manager, Neil Woodford, of Woodford Investment Management, has met privately with Sir Philip Hampton, the chairman of GlaxoSmithKline , to encourage the company to split off some of its business units.
Woodford founded Woodford Investment Management lLP in April 2014 and launched Woodford Patient Capital Trust in April 2015. Prior to that he headed Invesco Perpetual Income and Invesco Perpetual High Income fund, which managed assets of £10.36 billion and £13.64 billion in assets, respectively.
Woodford’s argument, according to Sky News, is that GSK’s stock is underperforming, down about three percent over the last year and investors are becoming impatient waiting for the company’s new pipeline to bear fruit. There has also been speculation that GSK would be a juicy acquisition target for Pfizer Inc. , or possibly Novartis , Roche Holding AG (RHHBY) or Johnson & Johnson .
Woodford owns about £35 million of GSK stock. Reportedly, Woodford is encouraging GSK to split off its HIV business, ViiV, its consumer healthcare division, and Stiefel, its dermatology unit.
GSK reported strong second-quarter earnings this year. And it set up a three-part transaction with Novartis where GSK bought Novartis’s vaccines business, except its influenza vaccines, and created a consumer healthcare joint venture. It sold its oncology portfolio and related research and development activities to Novartis.
GSK indicated at its latest earnings report that a portfolio of 11 new products, including Breo, a respiratory drug, and Triumeq, for HIV infection, had generated about £450 million in revenue. Its target for those 11 drugs is £6 billion by 2020.
Not all investors and analysts think this would be the time to split up GSK, partly because the restructuring of the vaccines business hasn’t been completed yet. “Now is not the time to look again at the group structure because the benefits of the Novartis transaction are yet to come through,” an unnamed investor told SkyNews.
This year has marked a particularly active merger and acquisition biopharma market, with Dealogic indicating 302 mergers and acquisitions from January to Sept. 4, accounting for about $235 billion. Yet some analysts are looking at larger companies, like GSK and Johnson & Johnson, and arguing that they would be more profitable if they broke up.
CNBC Mad Money’s Jim Cramer called for J&J to split into three companies back in July. “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.”
It’s possible that Woodford thinks the same thing about GSK. Although Woodford has not commented publicly on his talks with GSK, reportedly more meetings have been scheduled.
GSK traded for a year high of $48.81 on Mar. 20, 2015, dropped to $41.71 on July 28, then spiked to $45.14 on Aug. 10. Shares then dropped to $37.56 on Sept. 29. They are currently trading up at $42.10 per share.
