9th Feb 2022 14:34
(Alliance News) - GlaxoSmithKline PLC's capital markets day later this month looks set to be a pivotal moment in the tenure of Chief Executive Officer Emma Walmsley, as the drugmaker prepares to spin off its consumer health business.
GlaxoSmithKline operates in three major business segments: Pharmaceuticals, Vaccines and Consumer Healthcare.
Consumer Healthcare is a joint venture with US peer Pfizer Inc. It was formed to create a world-leading consumer healthcare business with well-known brands, including GSK's Sensodyne, Voltaren, Panadol, and Pfizer's Advil, Centrum and Caltrate.
Last month, Glaxo said it had received three bids from Unilever PLC for the consumer unit, the latest being for GBP50 billion in cash and shares.
Unilever subsequently said it would not lift its bid for the consumer unit above the current GBP50 billion offer.
GlaxoSmithKline on Wednesday met expectations with its 2021 results as it said the demerger of its consumer health business is on track for this year.
Revenue for 2021 nudged up to GBP34.11 billion from GBP34.10 billion the year before, marginally ahead of market forecasts for GBP34.08 billion.
The Brentford, London-based firm noted that sales, while stable year-on-year on a reported basis, were up 5% at constant exchange rates. Covid-19 sales contributed 4 percentage points to growth.
Pretax profit declined to GBP5.44 billion from GBP6.97 billion. Adjusted pretax profit came in at GBP8.09 billion, in line with analyst expectations.
Turning to the outlook for the remaining company without the consumer health arm, new GSK expects 2022 sales to grow by between 5% to 7% at constant exchange rates and adjusted operating profit to grow by between 12% to 14% at constant currency as compared with 2021.
Assuming global economies and healthcare systems approach normality as the year progresses, Glaxo said it expect sales of Specialty Medicines to grow 10% at constant currency and sales of General Medicines to show a slight decrease. Glaxo said this was "primarily reflecting increased genericisation" of established Respiratory products. Vaccines sales are expected to grow at a low teens percentage at for the year as a whole.
The company will hold its capital markets day on February 28 to highlight its overall strategy, capabilities and operations - including detailed financial information and growth ambitions.
GSK has been undertaking a major corporate transformation efforts in a bid to address long standing issues that have affected its performance in the past.
Last year, activist investor Elliott Investment Management acquired a stake in the drugmaker and criticised Walmsley.
Elliott has a long track record of forcing sales or breakups, ousting chief executives and overhauling boards.
The New York-based hedge fund called for pharmaceutical experts to pick the "right leadership" for Glaxo after the consumer health spinoff - a coded attack on Walmsley, whose background is in consumer products.
By spinning off its lower margin and non-core products, Glaxo has sought to transition to a biopharma company. It expects a strong drug pipeline, backed by strong research and development expenses to drive sustainable, long-term growth for the pharmaceutical business.
Under new GSK, Walmsley intends to double-down on efforts to focus on cutting-edge vaccines, HIV, and cancer treatment.
On Wednesday, the company said it has a strong pipeline of 21 vaccines and 43 medicines, many offering potential best or first-in-class opportunities for patients, and of which 22 are in pivotal trials
Sebastian Skeet, analyst at Third Bridge, said: "2022 is unlikely to give the company much respite after a rollercoaster end to 2021. Activist pressure continues to mount with no reprieve from Bluebell Capital Partners and Elliott Management for CEO Emma Wamsley.
"GSK's anti-Covid therapy Xevudy, which received emergency use authorisation in December, was a well needed tailwind to both the top and bottom line. As with all things Covid, longer term sustainability is the question - given the (thankfully) lower risk of severe impact and the increased use of oral antiviral alternatives. Indeed, GSK guide that Covid-19 solutions sales will be at a substantially lower margin in 2022, impacting New GSK operating profit growth by 5% to 7%.
"Our experts tell us the spotlight is focused on the consumer health spin-off, set to occur mid year, following news of Unilever's three unsuccessful bids and reported Private Equity interest. The market eagerly awaits a more detailed strategy overview at GSK's capital markets day in late February."
By Arvind Bhunjun; [email protected]
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