Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

The Hang Seng, EURO STOXX 50, MSCI ACWI ex-US, and MSCI EAFE display bearish short-term inflections. Additionally, 10-year yields in the US and Germany are breaking down below key support. These deteriorating market dynamics raise concerns of a deeper pullback, however other indicators remain largely positive. As a result, we continue to see a mixed, but overall constructive market. Actionable themes highlighted in today's report include Health Care and Real Estate.

The Hang Seng, EURO STOXX 50, MSCI ACWI ex-US, and MSCI EAFE display bearish short-term inflections. Additionally, 10-year yields in the US and Germany are breaking down below key support. These deteriorating market dynamics raise concerns of a deeper pullback, however other indicators remain largely positive. As a result, we continue to see a mixed, but overall constructive market. Actionable themes highlighted in today's report include Health Care and Real Estate.

Global Equity Strategy: Mixed Market Environment Continues As Yields Break Down

Global Special Situations & Strategy, SR Services Ltd

David Lepper

Global Special Situations & Strategy

SR Services Ltd

SR Services provides Strategic Knowledge and Solutions services for Family Offices and Corporate Business. 

We deliver this via advisory services, strategic planning, opportunity analysis/sourcing, as well as solution implementation. 

Whilst, we create intellectual discipline and operational leverage for your projects or daily activities, our ultimate objective is to empower whilst enhancing your decision making. 

Strategic Knowledge and Solutions

Event-Driven

<ul>
<li>
GSK has issued their response to Elliot’s letter, released 1st July 2021. The content of the response in our view reveals a lack of commitment, and a rather overly defensive stance suggesting GSK have been caught off guard by the letter. </li>
<li>
We discuss what investors (and GSK) should prepare for next. We sense whilst support is being named by GSK certain lines that have been laid out by investors, shareholders, and activists. These lines are set to be tested in the coming months. We discuss the key points and areas where named support may be at risk. We specifically, detail what investors and "long-standing" shareholders might wish to prepare for next from both GSK and Elliot. </li>
<li>The Silver Lining to all this: The one thing which is positive from this response is that GSK has confirmed that potential conditions are now present to achieve a higher share price in the coming months.</li>
</ul>



GSK has issued their response to Elliot’s letter, released 1st July 2021. The content of the response in our view reveals a lack of commitment, and a rather overly defensive stance suggesting GSK have been caught off guard by the letter. 

We discuss what investors (and GSK) should prepare for next. We sense whilst support is being named by GSK certain lines that have been laid out by investors, shareholders, and activists. These lines are set to be tested in the coming months. We discuss the key points and areas where named support may be at risk. We specifically, detail what investors and "long-standing" shareholders might wish to prepare for next from both GSK and Elliot. 
The Silver Lining to all this: The one thing which is positive from this response is that GSK has confirmed that potential conditions are now present to achieve a higher share price in the coming months.


GSK (GSK.L/​​GSK.N) Fails to Impress, in Their Response to Elliot

<ul>
<li>
Elliot's 17-page “open letter” to GSK signals the start of a public campaign, which is expected to see remuneration and proxy-led campaign increase in velocity. </li>
<li>
Elliot Advisors' frustrations have been unleashed following the 23rd June 2021 briefing, via this letter. We examine the facts presented and how these may be interpreted. </li>
<li>
Elliot's investment case outlined in the letter further supports our view around the embedded value within GSK, as well as the likelihood of increased activism.</li>
<li>We discuss the next steps for GSK and investors and why we support Elliot's view to &gt;45%: It is now up to GSK and investors to firm up their positions, as well as for fellow activists to decide if they wish to join the public campaign. We detail why we fully expect further activist funds to join the campaign. </li>
</ul>



Elliot's 17-page “open letter” to GSK signals the start of a public campaign, which is expected to see remuneration and proxy-led campaign increase in velocity. 

Elliot Advisors' frustrations have been unleashed following the 23rd June 2021 briefing, via this letter. We examine the facts presented and how these may be interpreted. 

Elliot's investment case outlined in the letter further supports our view around the embedded value within GSK, as well as the likelihood of increased activism.
We discuss the next steps for GSK and investors and why we support Elliot's view to &gt;45%: It is now up to GSK and investors to firm up their positions, as well as for fellow activists to decide if they wish to join the public campaign. We detail why we fully expect further activist funds to join the campaign. 


GSK (GSK.L/​GSK.N) Elliot Goes Public with Campaign Demands

<ul>
<li>
Elliot Advisor's activist campaign has put some pressure on GSK. The "New GSK" Investor Day on 23rd June was the first public event since the campaign broke in the mainstream media. </li>
<li>
The Investor Day was always expected to form a key defence forum for management to justify the board's and management’s strategy. As expected, the CEO and loyal lieutenants came out swinging.</li>
<li>
While some good data points were presented at the briefing around the embedded value behind the stock and the progress of the Vaccine and Speciality Business, management made some strategic missteps in the briefing.  </li>
<li>
Look for three items to benefit GSK's share price in the coming quarters. Firstly, a greater focus from the market on the value which exists within. Secondly, a strong likelihood that Elliot Advisors won't be the last activist making demands on GSK. Thirdly, good potential for an acceleration of fundamentals.</li>
<li>
We walk through the good, bad, and the ugly from the briefing, and highlight why Activist presence is but one key reason why GSK is set to break out of a long term trading range and upside to a fair value of GBP21.25/share or US$59.00/ADR is increasingly likely. </li>
<li>Our note builds off the Investment thesis and review of Elliot's campaign in <a href="https://www.smartkarma.com/insights/gsk-gsk-l-why-activism-might-be-the-right-medicine" target="_blank" data-smartkarma-citation="insights:53323" rel="noopener">GSK (GSK.L) Why Activism Might Be the Right Medicine.</a>
</li>
</ul>



Elliot Advisor's activist campaign has put some pressure on GSK. The "New GSK" Investor Day on 23rd June was the first public event since the campaign broke in the mainstream media. 

The Investor Day was always expected to form a key defence forum for management to justify the board's and management’s strategy. As expected, the CEO and loyal lieutenants came out swinging.

While some good data points were presented at the briefing around the embedded value behind the stock and the progress of the Vaccine and Speciality Business, management made some strategic missteps in the briefing.  

Look for three items to benefit GSK's share price in the coming quarters. Firstly, a greater focus from the market on the value which exists within. Secondly, a strong likelihood that Elliot Advisors won't be the last activist making demands on GSK. Thirdly, good potential for an acceleration of fundamentals.

We walk through the good, bad, and the ugly from the briefing, and highlight why Activist presence is but one key reason why GSK is set to break out of a long term trading range and upside to a fair value of GBP21.25/share or US$59.00/ADR is increasingly likely. 
Our note builds off the Investment thesis and review of Elliot's campaign in GSK (GSK.L) Why Activism Might Be the Right Medicine.



GSK (GSK.L/GSK.N) Activists Likely to Question the Spin-Off

<ul>
<li>
We see a fair value of GBP21.25/share, without significant value uplift from the Consumer Healthcare spinoff. Reviewing the Consumer Healthcare stub trade suggests GSK trades at 30-40% discount to its Pharma peers.</li>
<li>
We identify six fundamental reasons supporting a breakout from GSK's 10-year trading range.</li>
<li>GSK being subject to an Activist (Elliot Advisors) on its register is just one of our reasons for a share price re-rating. We see this as providing the CEO with a stronger mandate for change. </li>
<li>
Management providing News flow and clarity around growth plans and the Consumer Healthcare Spinoff on 23rd June 2021 should create visibility on the embedded value to be unlocked.</li>
</ul>



We see a fair value of GBP21.25/share, without significant value uplift from the Consumer Healthcare spinoff. Reviewing the Consumer Healthcare stub trade suggests GSK trades at 30-40% discount to its Pharma peers.

We identify six fundamental reasons supporting a breakout from GSK's 10-year trading range.
GSK being subject to an Activist (Elliot Advisors) on its register is just one of our reasons for a share price re-rating. We see this as providing the CEO with a stronger mandate for change. 

Management providing News flow and clarity around growth plans and the Consumer Healthcare Spinoff on 23rd June 2021 should create visibility on the embedded value to be unlocked.


GSK (GSK.L) Why Activism Might Be the Right Medicine.

United States

Sanofi operates as a pharmaceutical company. The Company manufactures prescription pharmaceuticals and vaccines. Sanofi also develops cardiovascular, thrombosis, metabolic disorder, central nervous system, and oncology medicines and drugs. Sanofi serves customers worldwide.

Horizon Pharma plc operates as a biopharmaceutical company. Horizon Pharma develops, acquires, and commercializes late-stage biopharmaceutical therapies for the treatment of pain and inflammation as well as specialty and orphan diseases.

Catalent, Inc. provides delivery technologies and development solutions for drugs, biologics and consumer health products. The Company's oral, injectable, and respiratory delivery technologies address the diversity of the pharmaceutical industry including small molecules, large molecule biologics and consumer health products.

Intra-Cellular Therapies Inc. researches and develops biopharmaceutical drugs. The Company engages in the research and development of small molecule drugs to treat neuropsychiatric and neurological diseases and other disorders of the central nervous system. Intra-Cellular Therapies offers its products to the medical industry.

Reata Pharmaceuticals, Inc. operates as a biopharmaceutical company. The Company focuses on identifying, developing, and commercializing product candidates that modulate the activity of key regulatory proteins involved in the biology of mitochondrial function, oxidative stress, and inflammation to address the unmet medical needs of patients with various life-threatening diseases.

Elanco Animal Health Incorporated operates as an animal health care company. The Company develops, manufactures, and markets products for companion and food animals. Elanco Animal Health serves clients worldwide.

Perrigo Company PLC is a global healthcare supplier that develops, manufactures, and distributes OTC and generic prescription pharmaceuticals, infant formulas, nutritional products, active pharmaceutical ingredients and pharmaceutical and medical diagnostic products. The Company's primary markets and locations of manufacturing and logistics operations are the US, UK, Mexico, and Australia.

Corcept Therapeutics Inc. is a pharmaceutical company that discovers and develops drugs for the treatment of severe metabolic and psychiatric disorders. The Company's lead product modulates the effect of cortisol, also known as the "stress hormone", by selectively blocking the binding of cortisol to one of its two known receptors, the GR-II receptor.

Prestige Brands Holdings, Inc. distributes over-the-counter healthcare and household cleaning products to retail stores in the United States, Canada and other international markets.  The Company distributes oral, eye and skin care; cough, cold, allergy and sinus; and household cleansers, sponges, scrubbers and cleaning pads.

Axsome Therapeutics, Inc. operates as a biopharmaceutical company. The Company focuses on developing therapies for pain, neurological disorders, and other central nervous system. Axsome Therapeutics serves patients worldwide.

Sun Pharmaceutical Industries Limited manufactures and markets pharmaceuticals for domestic and international distribution. The Company's pharmaceutical portfolio includes drugs in the areas of diabetes, cardiology, neurology, psychiatry and  gastroenterology.

Daiichi Sankyo Co, Ltd is a holding company established through merger of Sankyo and Daiichi pharmaceutical. The Group manufactures pharmaceuticals for human/veterinary use and medical tools and equipment. It also researches and promotes products through related companies throughout the world. The Group also produces food, food additives, livestock feeds, and agrochemicals.

Astellas Pharma Inc. is a pharmaceutical company committed to the therapeutic fields of Urology, Immunology including Transplantation and Infectious Diseases, Oncology, Neuroscience and DM Complications and Metabolic Diseases. With over 17,000 global employees, Astellas researches, develops, manufactures, and promotes its prescription drugs through subsidiaries in the US, Europe, and Asia

Takeda Pharmaceutical Co Ltd focuses on the Research & Development, Manufacturing, Sales and Marketing and Import/Export of Pharmaceutical Drugs. The Company focuses on the following core therapeutic areas: Cardiovascular & Metabolic, Oncology, Central Nervous System, Respiratory & Immunology, General Medicine (Gastrointestinal & Genitourinary) and Vaccine.

Otsuka Holdings Co Ltd is a pharmaceutical company. The Company manufactures, sells, imports and exports pharmaceuticals, clinical testing, and medical equipment for intractable diseases.

Jiangsu Hengrui Medicine Co., Ltd. develops, manufactures, and markets a variety of medicines and medicine packing materials. The Company's products include anti-tumor medicines, pain-killers, anti-infection medicines, aluminum foil, and other related products.

Zhangzhou Pientzehuang Pharmaceutical Co., Ltd. manufactures and markets Chinese traditional medicines, including Pientzehuang, Pientzehuang capsules, Pientzehuang lozenge, cough syrup, and other related products.

Zhangzhou Pientzehuang Pharmaceutical Co., Ltd. (600436 CH)

Zhangzhou Pientzehuang Pharmaceutical Co., Ltd.

UCB SA is a biopharmaceutical company. The Company specializes in the treatment of central nervous system disorders and inflammatory diseases. UCB operates worldwide.

Merck KGaA is a global pharmaceutical and chemicals company. The Company researches drugs in the areas oncology and neurodegenerative as well as autoimmune and inflammatory diseases. Also, it markets cardiovascular, fertility, endocrinology, and over-the-counter products as well as products for flat screens and the pharmaceutical, food, cosmetics, packaging, and coatings.

GlaxoSmithKline PLC operates as a research-based pharmaceutical company. The Company develops, manufactures, and markets vaccines, prescription, and over-the-counter medicines, as well as health-related consumer products. GlaxoSmithKline provides products for infections, depression, skin conditions, asthma, heart and circulatory disease, and cancer.

GSK PLC operates as a research-based pharmaceutical company. The Company develops, manufactures, and markets vaccines, prescription, and over-the-counter medicines, as well as health-related consumer products. GSK provides products for infections, depression, skin conditions, asthma, heart and circulatory disease, and cancer.

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GSK (GSK US)

Global Equity Strategy: Mixed Market Environment Continues As Yields Break Down

The Hang Seng, EURO STOXX 50, MSCI ACWI ex-US, and MSCI EAFE display bearish short-term inflections and 10-year yields in the US and Germany are...

Vermilion Research

GSK (GSK.L/GSK.N) Fails to Impress, in Their Response to Elliot

@GSK response to the @elliot letter highlights defensive stance suggesting GSK caught off guard. Our latest commentary covers the response, why...

David Lepper

GSK (GSK.L/GSK.N) Elliot Goes Public with Campaign Demands

Elliot's @GSK “open letter” signals the start of a remuneration & proxy campaign. GSK's response is key to neutralising campaign & maintaining...

David Lepper

GSK (GSK.L/GSK.N) Activists Likely to Question the Spin-Off

Good data points were presented at the #GSK briefing around the embedded value, but strategic missteps by management may question the spin-off...

David Lepper

GSK (GSK.L) Why Activism Might Be the Right Medicine.

GSK share price at the lower level of a 10-year trading range. An activist & an 23rd June briefing from the CEO on an asset spin-off and future...

David Lepper

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Global Equity Strategy: Mixed Market Environment Continues As Yields Break Down

The Hang Seng, EURO STOXX 50, MSCI ACWI ex-US, and MSCI EAFE display bearish short-term inflections and 10-year yields in the US and Germany are...

Vermilion Research

GSK (GSK.L/​​GSK.N) Fails to Impress, in Their Response to Elliot

@GSK response to the @elliot letter highlights defensive stance suggesting GSK caught off guard. Our latest commentary covers the response, why...

David Lepper

GSK (GSK.L/​GSK.N) Elliot Goes Public with Campaign Demands

Elliot's @GSK “open letter” signals the start of a remuneration & proxy campaign. GSK's response is key to neutralising campaign & maintaining...

David Lepper

GSK (GSK.L/GSK.N) Activists Likely to Question the Spin-Off

Good data points were presented at the #GSK briefing around the embedded value, but strategic missteps by management may question the spin-off...

David Lepper

GSK (GSK.L) Why Activism Might Be the Right Medicine.

GSK share price at the lower level of a 10-year trading range. An activist & an 23rd June briefing from the CEO on an asset spin-off and future...

David Lepper

GSK (GSK.L/GSK.N) Fails to Impress, in Their Response to Elliot

GSK (GSK.L/GSK.N) Elliot Goes Public with Campaign Demands