GSK sets out plans to split following full year earnings miss

GlaxoSmithKline has set out a two-year plan to split itself in two after missing its earnings targets in full year results and predicting a decline in earnings this year.

The big UK pharma is planning a similar move to that announced by Merck & Co by spinning off its older assets into a new company, although GSK has opted to put its unwanted assets into a joint venture with Pfizer.

In the move outlined by the company’s CEO Emma Walmsley, GSK will split into a biopharma company focused on R&D, with the other company specialising in consumer healthcare.

The split is no surprise: it has been public knowledge since the end of 2018 that GSK is going to spin off its consumer health business into a joint venture with Pfizer, but this is the first time that Walmsley has set a timetable for the spin-off.

Emma Walmsley, GSK

Emma Walmsley

GSK’s focus will be on research into new technologies, genetics and the immune system, and the changes aim to create £700 million in annual savings by 2022 with total costs estimated at £2.4 billion.

One-time costs to prepare the healthcare unit to stand alone will be around £600 million to £700 million.

Group sales rose 10% during the year to £33.8 billion as expected, including a 21% growth in the company’s vaccines business driven by shingles vaccine Shingrix.

But earnings per share were short of analysts’ expectations at 123.9p, below consensus estimates of 125p.

GSK has also taken the opportunity to throw out some of research products that were not producing results.

Development of a PI3kb inhibitor, GSK2636771, has been terminated as part of the R&D rethink.

The drug had been in early to mid stage development in certain advanced solid tumour patients, although no data have been released so far. Ongoing investigator-sponsored studies will continue, GSK said.

GSK has also axed its HIV vaccine HVTN 702 for the developing world, a few days after announcing a large trial failure.

Researchers in South Africa stopped a large efficacy study of the vaccine on the advice of a data monitoring committee.

The study had been running since 2016 and was testing a combination of vaccine components from GSK and Sanofi, and had involved around 5,400 sexually active men and women aged 18 to 35 throughout South Africa.

 

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