GSK ups guidance and unveils major restructure

The drug giant booked group sales £7.3 billion for the period, marking flat growth but a rise of 4 percent at constant exchange rates.

Pharmaceuticals sales came in at £4.2 billion, inching up 1 percent (CER), while Consumer Healthcare rose 3 percent (CER) to £1.8 billion.

However, in terms of growth its was the vaccines department which stole the show, with revenues leaping 16 percent (CER) to £1.3 billion, primarily on solid sales of new shingles vaccine Shingrix in the US.

Particular highlights for the quarter include sales of: Ellipta products, which leapt 26 percent (CER) to £509 million; asthma biologic Nucala (mepolizumab), up 100 percent (CER) to £141 million; and HIV drugs Tivicay (dolutegravir) and Triumeq (abacavir, dolutegravir, and lamivudine), up 15 percent (CER) to £1.1 billion.

Also, Shingrix sales came in at £167 million, and GSK said it now expects full-year sales of £600-650 million for the jab.

"Sales growth reflected strong commercial execution of the three new launches we have prioritised: Trelegy Ellipta which provides three medicines in a single inhaler to treat COPD; Juluca (dolutegravir and rilpivirine), the first 2-drug regimen, once-daily, single pill for HIV, helping to reduce the amount of medicines needed, and Shingrix, which represents a new standard for the prevention of shingles," said chief executive Emma Walmsley.

Pre-tax profits hit $614 million, compared to a loss of $178 million for the year-ago period, while earnings per share were 9.0p, compared to a loss per share of 3.7p for the second quarter of 2017.

"Focused improvements in operating performance have helped deliver increases in earnings and cash flow," Walmsley said, and also announced "a new major restructuring programme, which aims to significantly improve the competitiveness and efficiency of the Group’s cost base with savings delivered primarily through supply chain optimisation and reductions in administrative costs".

The restructuring programme is expected to deliver annual cost savings of £400 million by 2021, which will underpin a new approach to R&D at the firm, focusing on science related to the immune system, the use of genetics and investments in advanced technologies.

As such, the group also announced a new strategic collaboration with consumer genetics and research group 23andMe, "to take advantage of novel genetic insights to enhance selection of drug targets and clinical development of new medicines."

This deal offers GSK "a transformational opportunity" to utilise 23andMe's database and statistical analytics to identify disease-relevant genes and novel targets.

Commenting on the results, Fiona Cincotta, senior market analyst at www.cityindex.co.uk, said: "The introduction of generic competition to Advair (salmeterol/fluticasone), while taking longer than expected, still looms as a major hit to earnings next year. But strength in vaccines and cash flow opportunities presented by the Novartis deal look like providing an increasingly effective buffer that will ultimately help keep the dividend intact.

"Of course, the main game for chief executive Emma Walmsley is reinvigorating GlaxoSmithKline's pharmaceuticals division. The 23andMe deal will stoke optimism that star hire Hal Barron has a few more hit discoveries left in him yet."

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