Staff of Reuters 3 minutes Reuters (Reuters) – Elliott, an activist fund that has purchased a “substantial” interest in GSK, has written to the British company’s board of directors with five primary proposals for improving the company’s performance. PHOTO FROM THE FILE: On November 26, 2019, a GlaxoSmithKline (GSK) logo is seen at the GSK research centre in Stevenage, United Kingdom. Peter Nicholls/REUTERS Elliott’s proposals are summarized below. ENSURE ‘RIGHT’ LEADERSHIPBefore the consumer business is separated in mid-2022, Elliott wants GSK to nominate non-executive directors with extensive biopharma and consumer healthcare knowledge. The fund wants GSK’s strengthened board to use “strong processes” to choose leadership for the two new firms formed by the split, taking into account both internal and foreign candidates. Elliott stated that it was also willing to give a list of potential applicants. TARGETS ARE INCENTIVISED The part of GSK’s incentive plan connected to financial benchmarks, according to the fund, should be “significant.” GSK’s forecast for sales growth of more than 5% per year until 2026, as well as a more than 10% increase in operating profit, should serve as the foundation for contemplating bonuses, according to the company. Elliott also proposed that GSK consider tying a portion of executive compensation to longer-term goals. INVESTMENTS AND PROFITABILITY lliott backed New GSK’s pharmaceuticals business prioritizing pipeline investments, saying that such a strategy should be continued “”A much-needed” cost-cutting strategy is in the works.” GSK’s new profit objective of more than 30% operating profit margins by 2026 is a positive move in the right way. It does not, however, go far enough “Elliott remarked. New GSK should aim for a 32 percent operating profit margin by 2026, according to the report. OPENNESS TO DIFFERENT OPTIONS Elliott stated that some transactions, such as the sale of the consumer division, might have significant synergies, and that GSK should stay open to the idea of deviating from its existing strategy. “Any strategic possibility for the sale of CH consumer health) should be pursued thoroughly and followed by a clear plan for how GSK will use the revenues,” the investor added, pushing GSK to consider alternatives “impartially.” VACCINES AND PHARMACEUTICALS New GSK’s vaccines and pharmaceuticals businesses, according to Elliott, should not be fully integrated because there are no “obvious synergies” between the two. Providing more autonomy to the vaccines division may boost talent retention and “nimbleness,” Elliott said, adding that a distinct divisional reporting structure would allow investors to evaluate GSK’s “crown jewel” vaccines segment fairly. Elliott made it plain that it was not suggesting the sale of the vaccines division, which is the world’s most profitable. Pushkala Aripaka in Bengaluru contributed to this report. Jane Merriman did the editing./n
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