GlaxoSmithKline Steps Up Research in Preparation of Consumer Health Split -- Update

Date : 02/05/2020 @ 2:08PM
Source : Dow Jones News
Stock : GlaxoSmithKline PLC (GSK)
Quote : 38.08  0.55 (1.47%) @ 12:49AM
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Last $ 37.90 ▼ -0.18 (-0.47%)

GlaxoSmithKline Steps Up Research in Preparation of Consumer Health Split -- Update

Glaxosmithkline (LSE:GSK)
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--GlaxoSmithKline announced two-year strategic review ahead of consumer health split in 2022

--The company is looking to increase its focus on research and sell noncore assets

--Glaxo also missed analyst forecasts across a number of metrics

 

By Carlo Martuscelli

 

GlaxoSmithKline PLC (GSK.LN) said Wednesday that it will increase investment into research while trying to streamline the company as part of a two-year program to prepare for the eventual split of its consumer-health business.

Measures that are being considered include divestment of noncore assets, the British pharmaceutical major said, adding that it had put its prescription-dermatology business under review for a possible sale.

As part of the program, the company said it is targeting 700 million pounds ($910.8 million) in annual savings by 2022. Cash costs are expected to amount to GBP1.6 billion, which Glaxo expects to be largely be covered by divestments.

In December 2018 the FTSE-100 listed drug maker said it would combine its consumer-health unit with U.S. rival Pfizer Inc. (PFE), to eventually spin off the joint venture. The two-year program aims to prepare for the split in 2022--leaving behind a research-focused biopharmaceutical company specialized in immune-system medicines, genetics and new technologies, Glaxo said.

The company also posted a 25% increase in profit before tax in the final quarter of the year, but missed analyst forecasts across several metrics and guided for declining earnings in the year ahead.

Pretax profit in the fourth quarter was GBP1.71 billion, up from GBP1.37 billion the year before. Sales increased by 8.6% to GBP8.90 billion, missing a consensus analyst forecast of GBP9.03 billion provided by FactSet.

Adjusted earnings per share--a metric closely watched by analysts that strips out one-off items--fell by 16% when accounting for currency effects, to 24.8 pence, missing analyst forecasts of 30 pence.

The British pharmaceutical major is facing heavy investments into research as it continues to rebuilds its pipeline of cancer drugs after having divested its oncology portfolio in 2014, as well as competition to its best-selling inhaler Advair.

Looking ahead, the FTSE 100-listed company said that it expects adjusted EPS to decline by between 1% and 4% at constant rates in 2020, citing a two-year period of mounting investment in its key new products.

Glaxo declared a dividend of 80 pence for the year and said it expects the pay-out to remain unchanged in 2020.

At 1336 GMT, shares of the company traded 2.1% lower at GBP17.76.

 

Write to Carlo Martuscelli at carlo.martuscelli@wsj.com; @carlomartu

 

(END) Dow Jones Newswires

February 05, 2020 08:53 ET (13:53 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.

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