A real Gent at GSK

GlaxoSmithKline has appointed former Vodaphone boss Sir Christopher Gent to the board of the Company as a non-executive director with effect from 1st June 2004.

It was also announced that Sir Christopher Hogg will retire from the board on 31st December 2004. Gent has been appointed deputy chairman and will succeed Sir Christopher Hogg as non-executive chairman with effect from 1st January 2005. Commenting on the appointments, Hogg, chairman of GSK, said: 'I am delighted that Chris is joining the Board. Sir Christopher brings with him many years of experience and a track record of delivering outstanding performance in a highly competitive global industry which will be invaluable to GSK.'

GSK also appointed Sir Deryck Maughan to the board. 'He brings a wealth of international corporate and investment banking experience, which will be of great value to the board,' Hogg commented.

GlaxoSmithKline's investors speculated yesterday that the appointment of Gent could herald further acquisitions and a tougher stance on executive pay. During his six-year tenure as chief executive of Vodafone, Sir Christopher oversaw £170bn of acquisitions including the hostile takeover of Mannesmann, the German engineering and telecommunications group.

'Pharmaceuticals is an industry that has seen serial consolidation,' said one large shareholder. 'There are issues of scale in this industry and it would be one of the aspects that investors would expect the new chairman to address.'

Gent's principal role is seen as providing a bridge between the executives of the Anglo-American group and the largely UK shareholder base. Jean-Pierre Garnier, chief executive, who is based in Philadelphia, is considered a talented manager with an impeccable drugs industry CV. However, he has not managed to build a strong rapport with the UK shareholders.

Analysts say that Gent could also face a further concern from investors - the share price. 'At £11.68, the shares are not far from their low and GSK trades at a substantial discount to the rest of the drugs sector.

Facing generic competition on several drugs, GSK's earnings growth is expected to be sluggish over the next two years.' Garnier has ruled out a large acquisition and has shown confidence in the group's pipeline of new drugs to produce strong profit growth. However, if GSK does not start to see encouraging news about drugs in late-stage trials over the next year, the board will come under increasing pressure to consider another deal.