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GSK shares unsteady as activist investor drops vaccine business sale


CharlotteIG

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Although the GSK share price has underperformed against its close competitors in the past year, signs are starting to improve following positive moves from an activist investor and the release of highly anticipated new products.

 
  • GSK shares down 2% year to date
  • Shares reached £13.48 this morning but slumped afterwards
  • GSK retains operations in the UK and not sell off vaccine operations

What is going on with GSK shares right now?

GlaxoSmithKline shares saw a brief rally after the price dropped as markets opened in London on 27 May. This was following news that the US activist investment firm Elliott Management, which recently acquired a significant stake in GSK will not be forcing the company to sell off its vaccine and pharma departments. However, the share price slumped shortly after, indicating that the beleaguered pharma giant is not out of the woods yet.

Speculation had been rife that the US company would also slash GSK's R&D budget and divide it up into UK-based and overseas operations. However, Elliott Management said all such plans would be scrapped following discussions with the GSK leadership and the UK Government, which reportedly sees GSK as a 'national champion'.

The GSK share price rose to a peak of £13.48 after markets opened, before trending downwards in the morning. Markets may consider this a sign that Elliott has faith in the £68 billion company to produce better returns for shareholders in the future, following the success of recently-announced Covid-19 treatments produced by GlaxoSmithKline. Nonetheless, issues related to its under-performance this past year remain outstanding.

Does the longer-term future look positive for the GSK share price?

GSK's reprieve has also come as a relief to figures in government who strongly wished to see a strong GSK remain in the UK. This does not indicate how the GSK share price will perform in the longer term, though. GSK has consistently underperformed the FTSE this year, with shares falling 18% over the past 12 months, while the FTSE has grown 16% in that time.

Meanwhile, competitors such as AstraZeneca have seen notable growth in their share price, partly due to its success with its Covid-19 vaccine. However, signs are on the horizon that GSK might be catching up.

On Wednesday, the US FDA approved for nationwide use of GSK's new Covid-19 antibody drug, in a move that could represent billions of pounds in revenue for the company. GSK also is set to begin the phase III trial of its very own Covid-19 vaccine, something that may benefit GSK share price if things go well.

 

 Daniel Smyth | Financial Writer, London | Publication date: Thursday 27 May 2021 15:49

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