GSK raised its annual profit outlook on Wednesday after better-than-expected third-quarter results on strong sales of key drugs and cost cutting ahead of a planned split next year, in a boost to its shares.
GSK's outperformance buys CEO Emma Walmsley space as she faces questions from two activist investors over her ability to manage the separation and reinvigorate the drug development pipeline. Walmsley has stood her ground, saying the vast majority of investors were behind her strategy.
Earnings Per Share
The drugmaker now expects 2021 adjusted earnings per share to fall by between 2% and 4% at constant exchange rates, excluding any boost from its COVID-19 offerings.
It had previously expected a mid-to-high single digit percentage drop.
The results and outlook sent GSK's London-listed shares up by as much was 3.6%. At 1248 GMT, the stock was up 1.3%, poised to close at a seven-week high, while the STOXX Europe 600 Health Care index slipped 0.1%.
Improved Outlook
GSK's improved outlook rests on expected pharmaceuticals sales growth, despite a forecast for lower vaccine sales as a surge in the coronavirus Delta variant delayed an expected recovery, including for its key shingles shot.
However, Shingrix sales grew 34% to £502 million, exceeding expectations, while in another key outperformance, revenues of inhalable asthma drug Trelegy jumped 68% to £326 million in the quarter.
"As people didn't want to go out and leave their houses and (health systems) were really prioritising mass scale vaccination, that was the main hit. These are deferred and not lost sales for sure and it's good to see us firmly on the recovery track," Walmsley said on a results call.
'PIPELINE PAINS'
Turnover at the world's biggest vaccine maker by sales rose 5% to £9.1 billion ($12.5 billion) for the three months to 30 September, while adjusted earnings were up 3% to 36.6 pence per share.
Analysts had expected third-quarter earnings of 29.4 pence per share on sales of £8.73 billion, a company-compiled consensus showed.
GSK said it was sticking with its plan to spin off consumer health in a mid-2022 stock market flotation, after a report the business could attract bids from private equity firms.
Leadership Changes
Activist investors Elliott and Bluebell have called for a sale of the unit, among other proposals for the remaining pharmaceuticals and vaccines business, which will retain the GSK name, including leadership changes.
In a recent development setback for Walmsley, GSK and Germany's Merck KGaA last month ended their collaboration on cancer treatment bintrafusp alfa, once seen as holding great promise, on disappointing trial data.
"Despite a quarter in which pipeline pains have persisted and activist investors continued to question (Walmsley's) suitability as CEO, GSK has improved full year EPS guidance," Sebastian Skeet, healthcare analyst at Third Bridge, said.
In preparation for splitting the company, a new chair of the consumer healthcare business, a joint venture between GSK and Pfizer, is expected to be announced before the end of the year, GSK said.
In July, the unit's Chief Executive Brian McNamara was appointed to stay at the helm after its independence.
News by Reuters edited by Donna Ahern, Checkout. For more A Brands stories click here. Click subscribe to sign up for the Checkout print edition.
