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GlaxoSmithKline expects more disruption in vaccines arm this year as governments focus on COVID-19


GlaxoSmithKline PLC (LON:GSK) said it expects further disruption during the first half of the year in its vaccine arm as governments are focusing on rolling out COVID-19 jabs.

Revenue in the segment is expected to rise 0-4%, after dipping 2% to £7bn in 2020.

READ: GlaxoSmithKline enters €150mln collaboration with CureVac for COVID-19 vaccines

The FTSE 100 group is collaborating with Medicago, Sanofi and CureVac to develop COVID-19 vaccines but has remained behind competitors Pfizer/BioNTech, Moderna, and Oxford/AstraZeneca.

It’s missing out on huge potential for revenue upside, considering that Pfizer forecast its jab to generate US$15bn (£11bn) of sales.

While the Medicago formulation is currently at the final stage of clinical trials, the Sanofi one is back into the lab after some disappointing test results, so it will not be market-ready until the fourth quarter of 2021.

Earlier on Wednesday, the pharma giant revealed its third COVID-19 vaccine partnership with German biopharma CureVac to focus on mRNA formulations to target variants of the virus as they emerge.

In the current financial year, pharmaceutical revenue is also expected to grow 0-4% while consumer healthcare will advance 1-7%.

GSK is also to announce a new dividend policy, implemented from 2022 onwards, that will “deliver competitive and attractive returns informed by appropriate earnings pay-out ratios” but will be lower than the current value.

The drugmaker added it is on track to separate two new standalone Biopharma and Consumer Healthcare companies in 2022 to save £300mln annually while it also made £1.1bn from divestments.

For the year to December 31, shareholders will receive a final dividend of 80p per share.

Turnover in the period inched up 1% to £34bn, driven by a 12% in pharmaceuticals and offset by a 3% dip in pharmaceuticals and lower vaccine revenue.

Profit before tax was 12% higher at £6.9bn, while earnings per share surged 23% to 115.5p due to cost control measures.

“Messy” results

Nicholas Hyett, analyst at Hargreaves Lansdown, said the results were “a bit of a mess” with disappointing underlying numbers, with sales “going backwards”.

“Management put that down to a few identified brands that are already earmarked for disposal, but the remaining ‘core’ products aren’t exactly shooting the lights out,” he commented.

“The pandemic has also negatively affected demand for some traditionally more reliable Pharmaceutical products, like antibiotics. That would be manageable were it not for the long drag of patent losses in key asthma products – offsetting much of the progress in newer pharmaceutical products.”

“GSK is a company in transition – and by 2022 will be starting life as two separate companies. While we haven’t always supported breaking the business up, we now think the move can’t come soon enough. GSK in its current iteration seems to be struggling to set out a clear vision of what it offers investors. Hopefully its successor companies are a little more streamlined.”

Shares dropped 5% to 1,301.85p on Wednesday after lunch.

–Adds analyst comment–

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