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Much to ponder for GlaxoSmithKline's new boss

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Time for action

Next week is a big one for Emma Walmsley, GlaxoSmithKline’s (LON:GSK) newish chief executive.

It is her second set of quarterly results since taken over in April, but this time they will be accompanied by a strategic plan to lift Glaxo out of a torpor that has seen it underperform the FTSE 100 by more than 20 percentage points over five years.

At least, Walmsley should not be short of things to ponder as suggestions have been plentiful.

Some are more radical than others. Fund manager Neil Woodford dumped his whole holding in May apparently due to the pharma’s refusal to contemplate a break-up into its component parts.

Three of the divisions are serial underperformers and there are doubts about the fourth, he said at the time.

 And that made him worry about the dividend’s sustainability.

Glaxo’s two areas of dominance and historical growth – respiratory/HIV are facing increased competition and pricing pressure added Goldman Sachs this week.

A much more focused R&D strategy, identifying areas of strength and committing resources to fewer projects was the US broker’s remedy.

At least Goldman does not believe the dividend is under threat, not yet anyway, but if Walmsley does not come up with the goods on Wednesday there may be a more pressing danger.

The wave of US companies buying assets in the UK has reached almost tidal proportions, with the latest to fall apparently privately-quoted civil engineer CH2M, the firm behind many of the UK’s largest business projects.

Unless Glaxo’s performance starts to pick up it seems more than plausible that either a private equity firm or one of its US-based pharma rivals will have a tilt.

AstraZeneca managed to bat away Pfizer three years ago through a combination of US tax laws and a decent pipeline of potential blockbusters, something critics say Glaxo badly lacks.

Astra also had the vocal banking of Neil Woodford, something else that in future Glaxo will have to do without.


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