GlaxoSmithKline makes bold move with £130m Covid-19 investment | Nils Pratley

GSK’s share price has been left standing by AstraZeneca’s high-risk success in cancer treatments

Monday’s most important vaccine news was the promising early data from the Oxford University and AstraZeneca coronavirus trial – “robust immune responses” is encouraging. But let’s not overlook other vaccine developments. The industry has been viewed for years as a dull subsector of the pharmaceutical business; now it is a whir of deal-making activity.

GlaxoSmithKline, already one of the world’s biggest vaccine makers, leaped into action by paying £130m for a 10% stake in German group CureVac, the company that briefly registered on President Trump’s radar (he suggested the US should buy the firm for its Covid-19 possibilities).

CureVac, alongside the likes of fellow German group BioNTech and Moderna of the US, is a pioneer of the messenger ribonucleic acid (mRNA) approach to vaccine development. Instead of injecting an antigen to trigger an immune response, the approach tries to encourage the body itself to produce the necessary protein. It’s pioneering stuff but, if it works, the idea is that development and production schedules could shorten radically.

GSK will not have a role on CureVac’s Covid-19 programme, though it will obviously have exposure via the equity stake. Instead, the prime interest will come via five research projects for which GSK is providing £104m of funding. Those programmes are yet to be named but, if they are successful, the milestone payments would be multiples of the initial sum. So there is potential for this to be a big deal.

GSK’s share price was virtually unmoved since the adventure is still only a long-term bet that carries obvious scientific uncertainties. But it is further evidence of GSK’s increased willingness to take more punts, even if, on this occasion, the other rationale will be to defend a historic strength in vaccines (for shingles, meningitis and so on).

A greater appetite for risk-taking investments has paid off spectacularly for AstraZeneca in oncology in the past five years. GSK, which has been left standing in share price terms, now seems to be taking the same bolder approach under chief executive Emma Walmsley. There are no guarantees, but being big in vaccines suddenly looks a much-needed point of advantage for GSK.

Change – the only constant at M&S

Marks & Spencer has been in restructuring mode for about two decades, so there’s no surprise that Covid-19 should produce more of the same. Most traditional retailers, from John Lewis to Boots, are in retreat and M&S chief executive Steve Rowe had signalled job cuts in the offing in May with his “never the same again” riff on the pandemic’s effect on shopping habits.

If anything, the intended loss of 950 jobs at M&S from a workforce of 78,000 probably counts as a smaller retrenchment than feared given the corporate ambition to complete three years’ worth of restructuring in 12 months. Store management posts, plus head office roles in property and operations, are the target this time.

Shareholders, then, can expect more exceptional charges. To put it mildly, the “adjustments to reported profits” line tends to be busy at M&S. An astonishing £1.9bn of adjustments (always downwards, naturally) have been clocked up in the past five years as stores have closed, the value of freeholds been written down and so on. The end to restructuring, unfortunately, is not yet in sight.

Walmart fishing for a nibble at Asda

Roll up, roll up, who wants to buy Asda? Or, if you don’t fancy the whole thing, how about an ownership slice? Yes, US parent Walmart is looking for buyers or investors for its supermarket chain again, having received “renewed inbound interest”.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

It is hard, though, to believe the pandemic has boosted Asda’s value. Becalmed share prices among the quoted UK supermarket chains tell the story: extra online demand from shoppers has not translated into a profits boom because operating costs have also soared.

An investor in Asda at this point must also assume consolidation among the big four UK chains is impossible. The Competition and Markets Authority rightly killed a planned takeover by Sainsbury’s last year and its analysis may apply for a generation. Walmart will find somebody if it drops its valuation of Asda low enough, but there’s an air of desperation about this on-off auction.

Contributor

Nils Pratley

The GuardianTramp

Related Content

Article image
Bezos is handing over fronting Amazon, but not his grip on his creation | Nils Pratley
The Amazon founder gains time for other projects, such as space and newspapers, while still making the big decisions

Nils Pratley

03, Feb, 2021 @7:40 PM

Article image
Will Lloyds chief enjoy plain sailing or will he jump ship? | Nils Pratley
Lloyds is riding high, but allure of global stage could be enough to entice António Horta-Osório away from comfortable gig

Nils Pratley

28, Apr, 2017 @10:56 AM

Article image
Bunnings beware: the Homebase revolution is failing to shape up
After the first full year of ownership by Australia’s Wesfarmers, the home improvement chain has lost £54m and the bullishness has gone

Nils Pratley

17, Aug, 2017 @6:45 PM

Article image
Grumbling Green needs to understand he's not dealing with a legal process
The work and pensions committee just wants to ask some legitimate questions and they can say what they like – that’s showbiz

Nils Pratley

13, Jun, 2016 @6:50 PM

Article image
Sports Direct doesn't need consultants, it should listen to its shareholders
Mike Ashley’s firm announced an external evaluation of the board, but the problems are obvious to all ... except Keith Hellawell

Graham Ruddick

18, Aug, 2016 @6:31 PM

Article image
Has Marks and Spencer really got it right at last? | Nils Pratley
We’ve heard the argument before, but now it does seem the moment of maximum danger has passed

Nils Pratley

26, May, 2021 @6:45 PM

Article image
M&S tries to reinvent itself – but things are always happening to it | Nils Pratley
Like Paddington Bear, Marks & Spencer’s good intentions are often frustrated by events – in its case, tough trading conditions

Nils Pratley

08, Nov, 2017 @7:59 PM

Article image
Why a fresh AstraZeneca fightback is required in Covid vaccine info row | Nils Pratley
Drugmaker isn’t entirely blameless but making it a political football for EU’s failures is simply ugly

Nils Pratley

24, Mar, 2021 @7:56 PM

Article image
TSB flotation: why its parent Lloyds looks the safer investment

Nils Pratley: Investors have done well on the first day of trading but there are at least four reasons why Lloyds had to price TSB at 17% below net asset value

Nils Pratley

20, Jun, 2014 @4:53 PM

Article image
Refunds rather than insults would serve Ryanair boss well | Nils Pratley
Michael O’Leary’s rants won’t cut much ice with the EU or UK. A more constructive approach to the coronavirus crisis probably will

Nils Pratley

18, May, 2020 @6:34 PM