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GSK outlines split plan after FY earnings fall short

By Elena Berton

The pharmaceutical giant flagged lower 2020 profits and said it would cost up to £700m to prepare its consumer healthcare unit as a standalone business

GlaxoSmithKline outlined its plan to split into two companies – one focused on prescription drugs and the other on over-the-counter products – and flagged lower 2020 profits after full-year results missed forecasts.

The toothpaste-to-vaccine group, which has a market capitalisation of £90.3bn ($117.82bn, €106.7bn), said it would have to pay costs of around £600m-£700m to prepare its consumer healthcare unit as a standalone business following its merger into a venture with US rival Pfizer.

Full-year sales in the consumer healthcare unit rose 17 per cent to almost £9bn.

Group sales in 2019 rose 10 per cent to £33.8bn – just below consensus of £33.86bn, bolstered by a 21 per cent growth in vaccines, notably in shingles, which helped offset pricing pressures on respiratory drugs.

Fourth-quarter sales rose 11 per cent to £8.90bn at constant currency, while adjusted earnings were 24.8 pence per share. Analysts on average had expected fourth-quarter earnings of 25.8 pence on sales of £9bn.

GlaxoSmithKline now expects 2020 adjusted profit to decline between 1 and 4 per cent. The forecast did not include any potential impact from the coronavirus outbreak that has killed nearly 500 people in China.

“In 2020, our first priority remains innovation, to progress our pipeline and support new product launches. Recent data readouts underpin our decision to further increase investment in R&D and these new products,” CEO Emma Walmsley said in a statement.

The programme to split the company into two separate businesses will target £700m in annual savings by 2022, with total costs estimated at £2.4bn, GlaxoSmithKline said.

FURTHER READING: GSK sells rabies and tick vaccines to rival in $1.1bn deal

FURTHER READING: Healthcare company Novacyt launches new coronavirus test

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