DAILY BRIEFING

New challenges at 'New GSK'

Written by Laura Sweeting, researcher
Edited by David Gaffney, associate partner
29 June 2021

Good morning,

They say it’s lonely at the top. The pressures and scrutiny faced by modern-day CEOs trying to steer companies through a pandemic whilst maintaining profitability is a whole new challenge and Dame Emma Walmsley, of pharma giant GlaxoSmithKline, has felt the weight of this burden more keenly than many of her peers recently.

In January, GSK fell significantly behind in the vaccine race, while consumer division profits suffered from a reduced cold and flu season due to lockdown. The company’s shares dropped dramatically and its first quarter results attest to a difficult year.

However, sales figures and financial forecasts may not be vexing Walmsley as much as the presence on the shareholder register of activist investor Elliott Management, which has loomed perilously over Walmsley’s tenure as CEO since it acquired a multi-billion pound stake in the business earlier this year.

Run by billionaire investor Paul Singer, Elliott Management is renowned for its tenacity in deploying influence, and embodies the growing influence of large, activist investors determined to have their view considered in boardroom s, increase shareholder value, scrutinize ESG performance and catalayse extreme change.

Walmsley recently set to work on a transformation programme for the business, splitting off the consumer health care section and creating a ‘New GSK’ with a refreshed and refocused drug pipeline. Elliott continues to question this strategy, undermining Warmsley’s leadership and triggering headlines such as, “activist investor Elliott plots CEO Warmsley’s removal”.

Having previously remained silent on the matter, Walmsley came out fighting last week, capping a week of investor roadshow meetings with a rare interview in The Sunday Times, in which she described herself as being “genetically blessed with stamina and resilience” and a “change agent”, making it clear that she intends to remain in her role for the foreseeable future.

Walmsley is one of only five female FTSE 100 chief executives and a recognised figurehead in a traditionally male-dominated STEM sector. A successful defence of her position against Elliott’s attacks will not only secure her job but secure a coveted position for women in leadership roles and the evidence from this past week suggests Walmsley possesses the perseverance and grit to give Elliott Management a good run for their money.

News

The British prime minister, Boris Johnson, has suggested that the full easing of lockdown restrictions in England on July 19 is “very likely”, with the delay in loosening restrictions offering the NHS more time to vaccinate the population following the spread of the Delta variant. Newly appointed health secretary, Sajid Javid, said in his first Commons appearance yesterday that the easing of restrictions will be “irreversible” when it comes.

Sir Kier Starmer,’s Labour Party faces increased pressure to win Thursday’s by-election in West Yorkshire’s Batley and Spen constituency after Labour’s worst ever result in a by-election in Chesham and Amersham earlier this month. Tensions in the Batley and Spen by-election continue to rise as Tracy Brabin, the region’s mayor, reported seeing Labour campaigners egged and kicked.

A new study has suggested that mixing COVID vaccines provides strong immunity against the virus. The Com-Cov trial studied the effects of combining Pfizer and AstraZeneca jabs. The results would allow for greater flexibility in mixing and matching different vaccines in future programmes and booster jabs in the autumn.

Scotland has recorded a record high number of positive COVID-19 cases with 3,285 positive tests returned in one day, although no deaths were reported. Scotland’s first minister, Nicola Sturgeon, has urged people to be “really careful” as cases continue to rise.

Business and economy

Britian’s accounting watchdog has launched an investigation into audits conducted for Greensill Capital UK and the bank owned by property and steel tycoon Sanjeev Gupta. The Financial Reporting Council (FRC) will investigate PwC and Saffery Champness. PwC’s 2019 audit of Wyelands Bank will also be scrutinised, with the FRC potentially imposing fines or sanctions depending on the result of its investigations.

One of the world’s largest digital asset companies, Binance, has had customer withdrawals frozen days after an operating ban was imposed by the UK’s financial watchdog. The Financial Conduct Authority (FCA) follows in the footsteps of regulators in Japan and Germany ,which have taken similar measures to ban the company’s operations. Over the past month, the FCA has continually warned members of the public to be cautious when investing in cryptocurrency.

Car manufacturer Nissan is set to announce the major expansion of its battery production in Sunderland. The government, which has supported the cost of the expansion, is optimistic that thousands of jobs will be supported by the investment, which marks a significant commitment to Britian’s electric car industry.

Columns of note

In The Guardian, Andrew Rawnsley discusses the resignation of health secretary Matt Hancock and argues that nothing amounts to a sackable offence under the current prime minister. Rawnsley criticises Hancock’s breaching of lockdown rules and argues that the length of time it took Hancock to resign emphasises the hypocrisy of there being one rule for those in power and one rule for everyone else.

In the Financial Times, Gideon Rachman suggests that rightwing extremism is now an accepted part of European democracy. Rachman argues that a majority of European countries now have a right-wing party or populist party on their political spectrum, but that these parties “look more like a chronic ailment than a mortal threat”. European democracy has adjusted and incorporated these parties into the political sphere, he writes. (£)

Markets

What happened yesterday?

London stocks closed in negative territory on Monday with the FTSE 100 down 0.88% at 7,072.97 and the FTSE 250 down 0.50% at 22,533.42.

Sterling gained 0.02% on the euro, trading at €1.1638. Comparatively, it fell 0.13% against the dollar, trading at $1.3877.

In company news:

Following the announcement of President Biden’s $2tn infrastructure plan, Japanese industrial conglomerate Hitachi will target the US for its next phase of growth. Hitachi announced in May that it would open a research facility in Oregon to centralise its US manufacturing effort.

On Monday, a US judge dismissed federal and state complaints about the social media company Facebook. Following the judgement, shares in Facebook rose four per cent, placing its market capitalisation at over $1tn for the first time in the company’s history.

Goldman Sachs faces a lawsuit for misleading shareholders about its work for Malaysian bank 1MDB. The shareholders are led by Swedish pension fund, Sjunde AP-fonden, whose members claim the bank’s actions were unethical and caused a huge fall in share price value.

What’s happening today?

Finals

Appreciate Grp.

D4t4 Solutions

Lamprell

Lookers

Seeen

Trakm8 Hldgs

Trading Announcements

Hunting

Interims

React Group

AGMs

Afarak Group

Anglo Asian

Attraqt Group

Br.amer.inv.tst

Cizzle Biotech

Crimson Tide

Datang Intl H

Gama Aviation

Mears

Mobile Tornado

Mhc Plc

Nahl Group

Pacific Assets

Rockhopper

Sdic Power.

Sound Energy

Sportech

Universe

UK economic annoucements

(09:30) Mortgage Approvals

(09:30) Consumer Credit

(09:30) M4 Money Supply

Int. economic announcements

(10:00) Consumer Confidence (EU)

(14:00) House Price Index (US)

(15:00) Consumer Confidence (US)

did you know

In 2008 thieves in Russia stole a whole church, brick by brick (source: QI Twitter).

Parliamentary highlights

House of Commons

Oral Questions

Justice

Urgent Questions

To ask the Minister for the Cabinet Office whether he will make a statement on the government’s use of emergency COVID contracts

To ask the Secretary of State for Transport whether if he will make a statement on the government’s plans for international travel

To ask the Secretary of State for the Home Office to provide and update on the EU settlement scheme

Ten minute rule motion

Bereavement

Estimates Day

Adjournment

Changes to NHS integrated care system boundaries

Westminster Hall

There are no Westminster Hall debates today

House of Lords

Oral Questions

Positive economic effects of the recommendations of the House of Lords Select Committee on the Social and Economic Impact of the Gambling Industry

Help for leaseholders unable to sell flats due to mortgage providers insisting on an EWS1 form despite Royal Institution of Chartered Surveyors guidance

Reduction of waiting lists for hospital treatment to March 2020 levels, and regular publication of data on waiting times

Response to the Climate Change Committee’s ‘2021 Progress Report to Parliament’

Statement

Security arrangements relating to ministerial offices and communications

Government’s plans for social care reform

Legislation

Telecommunications (Security) Bill – second reading

Debate

To move that this House regrets the Economic Partnership Agreement between the UK and the Republic of Cameroon given (1) the human rights abuses committed by President Biya’s regime, and (2) the lack of parliamentary scrutiny before trading arrangements came into force on 1 January; To move that this House takes note of the Interim Trade Partnership Agreement between the UK and the Republic of Ghana

Statement

COVID-19 update

Scottish parliament

There are no meetings scheduled today

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