GlaxoSmithKline Steps Up Research in Preparation of Consumer Health Split -- Update
February 05 2020 - 9:08AM
Dow Jones News
--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)
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