GlaxoSmithKline PLC (GSK, Financial) made another big move last week that may help get activist investor Elliott Advisors off its back. The British drug giant and the University of Oxford are starting a new center aimed at developing more effective treatments and at a faster rate, BioPharma Dive reported.
The Oxford-GSK Institute of Molecular and Computational Medicine, the venture’s moniker, will be headquartered at the university and funded to the tune of $40 million by Glaxo.
The latest pact follows the July deal between Glaxo and the California-based biotech Alector Inc. (ALEC, Financial), under which Glaxo paid $700 million for rights to two experimental drugs for neurodegenerative diseases—the company’s first investment in brain drugs in more than 10 years.
Glaxo has been under heavy fire by Elliott, one of the world’s most feared hedge funds. The firm fired its latest salvo at a small investor meeting in October, when Gordon Singer, head of the firm’s London office, again questioned whether GlaxoSmithKline CEO Emma Walmsley is the right person for the job.
Singer, son of Elliott boss Paul Singer (Trades, Portfolio) and apparent heir to the throne, also wanted to know what was holding back the drug company's share price, reported British website This is Money. In Glaxo’s defense, it has outperformed the VanEck Vectors Pharmaceutical ETF (PPH, Financial), which is made up of the company’s peers, year to date. However, over the last five years, the increase in Glaxo’s stock price is well behind that of the exchange-traded fund.
Glaxo shares have substantially lagged industry peers over the past five years.
With the Oxford and Alector arrangements, Glaxo is entering a field where others, until recently, have feared to tread. Brain drugs used to be a favorite of big pharma, including Glaxo, Pfizer Inc. (PFE, Financial) and Eli Lilly and Co. (LLY, Financial), who were pursuing new types of antidepressants. Later, AstraZeneca (AZN, Financial) and Bristol-Myers Squibb Co. (BMY, Financial) did have success in developing antipsychotic medicines.
But in the past few years, the quest for drugs for the brain has hit a dry spell. The simple fact is neuroscience is one of the hardest areas to conquer because of the complicated biology of the brain. Glaxo was one of the many companies that abandoned the field, but has jumped back in the game this year, as have others, encouraged by the emergence of new technologies like genetic sequencing and machine learning. For example, in amyotrophic lateral sclerosis, researchers have found more than 50 genes that seem to have some influence on the disease.
In the July deal, Glaxo gets the rights to two of Alector's experimental drugs designed to increase a protein that controls certain primary functions in the central nervous system. One of the medications is being tested for an unusual type of dementia, the other for more prevalent diseases such as Parkinson's and Alzheimer's.
The collaboration with Oxford is for five years and is designed to develop additional treatments for Parkinson’s, Alzheimer’s and ALS.
Glaxo has been working with the U.K. Biobank and the commercial genetics company 23andMe Holding Co. (ME, Financial) and said it already has a "rich pipeline of genetically informed targets and clinical projects in these areas." And with Oxford's "complementary" capabilities, it’s banking on identifying and prioritizing disease targets most likely to that are most likely to succeed in testing.
Will Glaxo’s latest moves be enough to keep Elliott at bay? Only time will tell.
