City grandee Neil Woodford sells off remainder of his fund's £1.2bn stake in GlaxoSmithKline

Francesca Washtell
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Woodford said "the sum of the parts [at Glaxo] is significantly greater than the whole" (Source: Getty)

Prominent City fundraiser Neil Woodford has sold of the remainder of his £1.2bn stake in pharmaceuticals giant GlaxoSmithKline, after a "frustrating experience" investing in the firm.

Woodford said his fund had dumped the remainder of his investment with the pharma group after more than 15 years because it is "a healthcare conglomerate with a sub-optimal business strategy, and shareholders face a cut to the dividend".

"Over a holding period of more than fifteen years, I have consistently believed that GlaxoSmithKline was capable of delivering growth and realising shareholder value. Neither has been forthcoming to the extent that I had hoped and expected," Woodford said in a long post on the Woodford Funds blog, titled "Glaxit".

Read more: GlaxoSmithKline names Emma Walmsley as chief executive

"Put simply, investing in Glaxo has been a frustrating experience, with three out of the four business units perennial underperformers. Some investors remain hopeful of recovery but I am now less optimistic. I have become more concerned about the prospects for the one Glaxo engine that has been firing on all cylinders."

He described the £80bn FTSE 100 group by saying that "the sum of the parts is significantly greater than the whole", adding:

Furthermore, a more focused Glaxo would be the driver of better performance – the conglomerate structure has allowed management to disregard the parts of the business that have underperformed. For example, if future success pivoted on the richness of the pharma pipeline, it would have to pay a lot more attention to that pipeline. Instead, the growth delivered by other parts of the business have been seen as a hedge against the underperforming pharma division – management has never had to live or die by the pharmaceutical sword and as a result, that part of the business has not received enough attention.

Read more: GSK’s vaccines chief will leave shortly after Witty

Woodford Funds manages around £17.5bn of assets. Woodford started cutting his stake in March, the Times reported, and sold the bulk of the rest last month, despite it being among the largest holdings in his Woodford Equity Income fund earlier in the year.

Woodford has used the proceeds of the sale to invest in other UK firms such as Lloyds Banking Group, Barratt Developments, Taylor Wimpey and British Land, the Telegraph reported.

New chief executive Emma Walmsley took up her role on 31 March, replacing Sir Andrew Witty.

Read more: Glaxo invests £275m and reaffirms commitment to post-Brexit vote UK market

Last month, GlaxoSmithKline posted better than expected revenues for the first quarter, though the firm has warned the threat of generic rivals has clouded its forecast for full-year earnings.

It posted sales across all businesses, with weak sterling in the wake of the Brexit vote last June providing a boost to sales and adjusted earnings per share. Revenue rose to £7.4bn from £6.2bn.

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