Stinging from a proxy loss and hungry for cash, GlaxoSmithKline bails on equity stake in Innoviva for a tidy $392M
Following a failed attempt to challenge a slate of new board candidates at a company in which it’s a significant minority shareholder, GlaxoSmithKline has sold off its entire equity stake.
GSK last week attempted to thwart the election of five proposed board members at the annual meeting of Burlingame, CA-based Innoviva, the biotech said in an SEC filing Thursday, objecting to all but one of the new candidates. Then later Thursday, GSK announced it had sold its entire 32% stake in Innoviva, raising about $392 million.
The Big Pharma said in a press release the sale would help fund its plans to split into two companies sometime next year. It wasn’t clear if GSK’s sale was a direct response to losing the challenge or why they objected, and a GSK spokesperson declined to comment.
According to Innoviva, nearly all of the votes against those five board candidates came from GSK’s shares. Each of the five received about 45.8 to 48 million votes in favor and 35.9 to 38 million votes against. GSK had controlled about 32 million shares.
Among the board members up for election included former Novartis CFO George Bickerstaff and Deborah Birx, the Trump administration’s coronavirus response coordinator. Birx was the only proposed board member to which GSK did not object.
The sale represents the latest move in a continuing dance between GSK, Innoviva and the latter’s former parent company, Theravance Biopharma, the San Francisco Business Times reported. Formerly just known as Theravance, Innoviva spun out from the company back in 2014. Theravance focuses now on drug development, while Innoviva collects royalties from several GSK-branded Ellipta inhaler products.
Over the last few years, Theravance and Innoviva have gone to court over how Innoviva planned to invest the royalties. Theravance argued the cash was going to be funneled back to shareholders, while Innoviva said it planned to invest some of the money into other companies. GSK, Theravance’s largest shareholder, backed the company in court.
In late March, an arbitrator ruled in favor of Innoviva, saying the company had not violated its agreement with Theravance.
As part of Thursday’s sale, Innoviva plans to distribute $110 million to one of its subsidiaries in order to fund the purchase, the company said. The subsidiary is a biotech and health care fund advised by Sarissa Capital Management, a hedge fund that engaged in an activist attack on Innoviva back in 2018. Innoviva’s CEO, Pavel Raifeld, is a former Sarissa investor who began his current position last May.
For GSK, the respiratory collaboration with Innoviva remains unchanged. GSK is expected to announce further plans regarding its split next month, Reuters reports, and CEO Emma Walmsley said after a disappointing earnings report in April plans for the separation are “well underway.”