Wednesday 5 February 2020 2:33 pm

GSK falls short of forecasts as firm prepares to split

Multinational drug firm Glaxosmithkline (GSK) saw a small rise in operating profit and earnings in 2019 as the firm announced it had begun its planned split into two companies following its venture with Pfizer.

However, earnings per share fell short of analyst expectations at 123.9p, below consensus estimates of 125p.

Pressure on the price of GSK’s respiratory drugs, for which patents recently expired, was blamed for the slight miss.

The figures

GSK’s profit grew to £8.9bn last year, a three per cent rise on 2019, despite a 16 per cent fall in the final quarter to £1.8bn.

Read more: GSK continues pharmaceuticals push with $1.1bn vaccines sale

Earnings per share held off a 21 per cent drop in the last quarter to post four per cent growth for the year as a whole.

Turnover reached £33.7bn, a 10 per cent improvement on 2018.

GSK’s pharmaceuticals division brought in £17.5bn in revenue, with vaccines and consumer healthcare posting takings of £7.1bn and £8.9bn respectively.

Free cash flow declined 11 per cent to £5.1bn.

Why it’s interesting

In December 2018 GSK formed a £9.8bn consumer health joint venture with US rival Pfizer, and announced that it would break its main company into two separate businesses.

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Today the firm announced that a two-year programme to prepare for the division of the firm into a research and development and a consumer health business was now underway.

GSK added that it would have to pay around £600 – £700m in preparation for the restructuring, costs which will be swallowed by the joint venture.

Chief executive Emma Walmsley labelled the venture a “major opportunity to create a global leader in consumer healthcare”.

In its respiratory medicines division, Advair sales fell 56 per cent due to its patent expiring. Nicholas Hyett, equity analyst at Hargreaves Lansdown, said:

“The launch of generic rivals to blockbuster asthma treatment Advair/Seretide was always going to cause GSK problems this year.

“Once a patent expires rivals pile in, forcing the incumbent to cut prices even as volumes tumble and the result is always painful. That’s an inevitable part of the Pharmaceuticals business though; a poisoned chalice at the end of every blockbuster rainbow.”

In vaccines, new shingles drug Shingrix, which was launched in 2018, saw sales more than double from £784m to £1.86bn in 2019, driving growth across the division.

The firm said it was too early to tell whether the coronavirus outbreak would impact its business, but is assisting in attempts to develop a treatment for the disease.

Read more: GSK’s ovarian cancer drug shows ‘exciting’ results

GSK is making its established pandemic vaccine platform technology available to help develop a much-needed vaccine for the disease, which has killed nearly 500 people.

What GSK said

Chief executive Emma Walmsley said: “GSK delivered a good performance in 2019 with growth in sales and earnings, together with strong cash generation. 

“We also made excellent progress in all three of our long-term priorities: innovation, performance and trust, strengthening our pipeline, improving operational execution and reshaping the company.”