GSK rebuffs Pfizer takeover bid

they may make an offer we can't refuse ...........

 

Isn't the Board's fiduciary responsibility to maximize shareholder value? This was apparently a first motion. Why wouldn't you at least entertain more discussion and negotiation? The publicity alone might have provided the market stimulus that GSK (despite the lack of growth drivers) is still woefully undervalued compared to other large pharma. GSK has a habit of not thinking strategically. It's like the several billion in proceeds from the Novartis deal. They immediately said they would rebate a special dividend and then later had to back off, angering the market. Why would you not just say from the start that you would explore strategic options? Don't shoe your cards on the first deal.

 

Pfizer is like a hoard of Vikings raping and pillaging. An all share deal is not worth pursuing but it doesn't appear any attempt was made to get a counter proposal. I still am underwhelmed by what was presented today and think a split of the various businesses may provide a shot in the arm and out from the heavy handed GSK leadership. Neil Woodford we need you!

 

Smug-boy sage strikes again. Please, just keep providing horoscopes and leave the predictions to the grown ups.

 

Except the predictions on this board have a horrible track record.

 

OK, I predict that you will eat AND drink something within the next 3 days. Let's just see.....

 

I predict you will make another moronic post.

 

And you would be correct as the board troll cannot help himself.

 

Exactly. They were barbarians at the gate. They would help out the fly by night investor who wants to make a quick buck and then move onto the next company. Fine let Valeant do that (for how much longer??) but it isn`t the way to build real value. Shareholders aren`t doing too bad from GSK with a 6% dividend yield.
Sure there have been mis-steps - like promising the special dividend from the Novartis deal. Thankfully most of that is being used to cut debt (the correct decision). But other companies make mis-steps too including the supposedly wonderful Pfizer (change in strategy on splitting, failed takeover approaches, failed R&D follow up to key assets like Lipitor).

 

Pass the crack pipe.

GSK's lifeblood is Advair. The other assets, with no generic downside will make a fraction of Advairs current revenue. Q3 offset was from downsizing, not from a robust portfolio.

 

Is all of the "special dividend" off the table for shareholders? I thought there was going to a smaller amount (1 billion pounds) offered in addition to the quarterly dividend. Was this discussed at the Q3 earnings call?

I haven't looked at the math closely to see if the previous post was correct in that a profit was generated due to restructuring. I had assumed that maybe the costs were higher as GSK accelerated restructuring so that they could start anew in 2016.

I want to believe so badly that the pipeline will replace loss of Advair.

 

Here's what was published in May 2015 about the special dividend:

However, the company cut the amount of money it will return to shareholders from the proceeds of the Novartis transaction to £1 billion from £4 billion, saying it wanted to maintain financial flexibility. The sum to be returned to shareholders will be paid via a special dividend alongside its fourth-quarter payment.

So you will not receive the dividend until the 4Q 2015 dividend is paid in 2016. I went back and looked at the 3rd Q 2015 transcript and nothing was mentioned pro or con about it. We'll see if the company pulls back on this if earnings fall in 4Q2015.

 

lol'z Laughed so much at that one myself. Advair 30-40% of the biz. Completely delusional statement. So funny to see the rats scrambling before the ship sinks.

 

We have gotten rid of most rats with GSK.......when were you fired ?

 

Rats are all gone but the roaches remain.

 

It all comes down to execution, especially with the Shingles vaccine filing in 2016. Very interesting pipeline and clear opportunities to differentiate GSK from others. However, most of the shots on goal are not for several years. In the interim, sales of existing respiratory franchise will need to pick up, including Nucala. Will GSK continue as one entity or be split?

 

As someone else mentioned Advair is a minority of sales (still significant). New product sales in Q3 were near GBP500 million and more than offset Advairs decline (<GBP200 million). So new products were significant and the stated goal is GBP6 billion from new products by 2020. Management wouldn`t be so clear if that was no achievable. Dolutegravir is well on the way to being a blockbuster.

 

There will be no split with the current management. Thoughts of splitting have been around since the company was formed in 2000. They have bulked up both Vaccines and Consumer because they want to keep them. They could have done a Novartis and sold them off, but didn`t. The company, for right or wrong, wants to diversify so not all its revenue or profit eggs are in one basket (i.e. Advair).
Of course this strategy could change (just like Pfizer keep changing their mind on whether to split themselves or not).

 

We seem to be pinning our hopes on Nucala and shingles vaccine in the near term coupled with sales improvement on Breo, Anoro, Incruse, and Tanzeum. I see many problems with this strategy.

1- Nucala is for very severe patients and is a buy and bill which is a niche. Pulmonoligists and allergists broadly speaking will not take on that risk of stocking a product and hoping to get reimbursed down the line. Same issues led to pharmacies taking on vaccines. If we can't be successful launching Anoro etc. how will we convince HCPs to use what is likely an expensive biological in office. Insurance coverage will likely be fragmented as I am sure not all payers will see the value. This is headed no where fast.

2- shingles vaccine is two doses and contains an adjuvant like cervarix did. Wall Street analysts were all over this and seemed concerned about this in their questioning. At R&D day they said Merck's product has only vaccinated 25% of eligible population with their one dose vaccine after 10 years on market. Why do we think we are going to do any better with a 2 dose vaccine which will have negative adjuvant and safety concerns and likely be more expensive. GSK vaccines has had multiple failures and delays in the past with vaccines. We are always late coming to market. This is Cervarix all over again but will be an even worse disaster. There is nothing else in the vaccine pipeline besides early phase gambles.

3- Breo, Anoro, incruse are failures compared to expectations. No way these products will make up even half of advair sales (4x4!!!!) This is a very crowded class and payers are pinning everyone down for large rebates for coverage. We have GSK reps selling breo and incruse, another group selling anoro, and inventiv people selling it as well. Customers must love that confusion. We are also giving it away for free for two years. This is simply not sustainable.

4- Tanzeum is in another crowded class where we compete with companies who are diabetes leaders. A leader in diabetes, we are not. I have friends on this team who tell me they are lucky to get 5 scripts a week. The nation goal of 100M in sales is a rounding error. We are also giving it away for free for 2 years and have a huge expensive sales force. This is also not sustainable.

I imagine the R&D day was a bit of a gamble designed to prop up the stock and potentially bid Pfizer up to come back to us in the game of hard to get. This failed miserably and they seem to have moved on. It seems Wall Street wasn't buying it either. See Forbes article "GSK's Vision needs more Vision" for post R&D summary. Pfizer probably approached GSK and said they are willing to come in and do a friendly deal and stop the bleeding for a fair price. GSK got greedy and probably felt they could get more hence the unusual dog and pony show put on in NYC, home to Pfizer. Now the emperor has no clothes but Witty will find a way to hang his hat on something ( for now the promise of 20 new products by 2020..... Get it, our talking point will be 20 x 20!!!!) in order to kick the can down the road a bit the same way they used the Novartis deal to buy them a year. Trouble is ahead my friends. Buckle up. Good luck to all.

 

Well, when 2020 does arrive, we can always say, "hindsight is 20:20"