GSK rejects Elliott's demands for board change, consumer sale

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By Pushkala Aripaka and Ludwig Burger

(Reuters) -GSK on Friday rejected Elliott's demands that the British company change its board and sell its consumer healthcare arm after separating it from its pharma business, a day after strongly worded proposals from the activist investor.

"The Board strongly believes Emma Walmsley is the right leader of New GSK and fully supports the actions being taken by her and the management team," GSK said, referring to the core pharmaceuticals and vaccine business.

It added that support for GSK's strategy and leadership was shown in talks with its largest shareholders.

In a letter to GSK's board, Elliott on Thursday said GSK should review its leadership and consider a sale of its consumer healthcare business as it confirmed it had taken a significant stake in the group.

Elliott demanded that directors with "more biopharmaceuticals and scientific experience" be added to GSK's board before the planned break-up of the company next year. That new board should then decide the best executive leadership, it added.

GSK said governance had already been strengthened with the appointments of former Bristol-Myers Squibb executive Charles Bancroft and Anne Beal, an entrepreneur, health policy expert and paediatrician, as non-executive directors in May 2020 and May 2021 respectively.

It added that more biopharmaceutical expertise was on its way with further appointments, noting this had been flagged previously.

Elliott declined to comment on GSK's detailed response on Friday.

EVOLUTION

The London-listed company on June 23 laid out plans to spin off its consumer healthcare arm into a separately listed company, in a move that would deliver an 8 billion pound ($11 billion) special dividend for its underperforming drugs business.

"The demerger structure reflects feedback from a significant proportion of GSK's shareholders that they wish to own Consumer Healthcare as a new listed entity," GSK wrote on Friday in defence of the plan.

Elliott had urged GSK to look at a full sale of the consumer health business, which is a joint venture with Pfizer, should the opportunity arise.

"Even in the absence of a CHC (consumer healthcare) trade sale or any other material actionable proposals, we expect Elliott's involvement to translate into positive near-term share price evolution," Citi analysts wrote in a note.

GSK shares were up 0.1% at 1518 GMT after gaining 1.3% on Thursday. The stock is up about 7% so far this year.

Walmsley, CEO since 2017, has made sweeping leadership changes in a bid to boost the drug development success rate, where the group had fallen behind peers, and improve the commercial performance of its sales force.

Yet, she has acknowledged that the stock continues to underperform against industry benchmarks.

Elliott's arrival on GSK's register was first reported by the Financial Times in April.

($1 = 0.7252 pounds)

(Reporting by Pushkala Aripaka in Bengaluru, Ludwig Burger in Frankfurt and Svea Herbst in BostonEditing by David Goodman, Kirsten Donovan and Louise Heavens)

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