It’s a miracle. A mere 25 years after Glaxo Wellcome and SmithKline Beecham merged to form GSK, the share price on Wednesday got back to where the combo started life – a shade over £20. It has been a very long wait.
A quarter of a century ago, the bosses of the day spoke about creating a “Microsoft of the pharmaceutical world” that would develop new medicines in never-seen-before quantities at faster speeds. A vast new head office in west London was opened by Tony Blair in 2002 to mirror the ambition. By then, however, the share price had already halved as investors twigged that, for all the fanfare, the mega-merger was really about bulking up defensively. The first decade was a blur of expiring patents, clashing egos, quarrels over executive pay and yet more promises of jam tomorrow.
The second decade was marginally better but, from about 2013, GSK was wholly eclipsed by AstraZeneca, which became the real model of a modern science-led pharma operation under Sir Pascal Soriot (still in post today). AZ hit its revenue targets every time and added a growth-enhancing injection of promising drugs from buzzy biotech firms. These days, AstraZeneca’s stock market value is more than twice that of GSK’s, an outcome nobody would have predicted at the turn of the century.
The legacy of GSK’s years of underperformance is deep suspicion of every financial promise the company makes. Investors have witnessed too many false dawns. Yet something else is also happening. There is a growing sense that a humbler GSK is closer – finally – to fulfilling its potential. It is why the share price had accelerated from £14 a year ago before Wednesday’s 7% jump to £20.80.
Emma Walmsley, who departed as chief executive at the end of last year, gets credit for ending the indecision over the consumer goods division – she demerged it as Haleon in 2022. In her eight years or so, she also bit the bullet by cutting an unsustainable dividend, recognising that the only route to salvation for a mis-firing pharma company is to spend more on research and development to improve the pipeline of new medicines and vaccines. Walmsley was unlucky to run into US litigation over a heartburn drug from the 1990s, but she signalled confidence by setting a long-term target for revenues that was beyond City forecasts: £40bn-plus by 2031.
Since she wasn’t going to be in post that long, a big open question was whether successor Luke Miels would share the confidence down to the precise billion. After all, the size of GSK’s credibility deficit is the fact that most of the sector analysts think £35bn is more realistic because a big-selling HIV drug will lose its patent on the way.
Miels’s first big outing – GSK’s financial figures for 2025 – was therefore an opportunity for him to hedge or qualify if he wished. Well, he didn’t. He expressed full confidence in the big number and in GSK’s strategy – as one would hope, given that he has been the chief commercial officer since 2017. For good measure, though, he did a passable impression of his old mentor from his AZ days, Soriot, in giving a sermon on “scientific courage”, backing your best bets sooner, being agile and generally showing more market nous.
Rah-rah words merely create good initial vibes, of course. But, since outsiders’ real visibility into the quality of research effort is virtually nil, full-throated bullishness from the new boss was the most shareholders could expect at this stage. Miels, like everybody else, knows the corporate history and the perils of overpromising. It’s still early days because pharma is the ultimate long-term business. But GSK, take two, is clearly sounding healthier.
