RUGS giant GlaxoSmithKline suffered an 18% drop in revenue in the first quarter of 2021 as sales of its drugs were slowed by the impact of the pandemic on general healthcare.
London-based FTSE 100 group said plans to split its over-the-counter and research-based pharmaceutical divisions into two separate companies were “well underway.”
But it is perhaps embarrassing to pin hopes for short-term recovery on a return to “ normal life ” spawned by the global rollout of Covid-19 vaccines developed by rivals.
Group revenue fell 18% in the first quarter of 2021, translating to total revenue of £ 7.4bn, slightly below consensus forecast of £ 7.8bn of pounds sterling.
GSK’s pharmaceutical arm reported a 12% drop in revenue to £ 3.9bn, impacted by a 47% drop in adult and adolescent vaccinations for its hit shingles vaccine Shingrix in the USA.
Mainstream healthcare fell 19% to 2.3 billion pounds, reflecting storage and the relatively mild winter season of colds and flu.
Operating profit fell 30% to £ 1.8 billion, while adjusted earnings per share was down 39% to 22.9 pence from the same period last year when sales had been flattered by the storage.
GSK is also feeling the heat after activist American investor Elliott Management racked up a multi-million pound stake.
The hedge fund has been silent on the reason for the buyout, but has a reputation for accelerating the pace of business change.
CEO Dame Emma Walmsley would not be drawn to the intervention today.
She said the first quarter results were in line with company expectations and “reflect the expected impacts of Covid-19”.
Walmsley added that growth prospects remain strong with the launch of a long-lasting anti-HIV drug, the start of late-stage trials for a vaccine against RSV respiratory disease and a new treatment for severe asthma.
She also dismissed Carping in the city over her intention to lead the new research company in the wake of the split despite the lack of scientific knowledge.
Unnecessary comparisons have been drawn with AstraZeneca boss Pascal Soriot, who studied to become a veterinarian.
Walmsley, who worked in consumer marketing for L’Oréal for 17 years before joining GSK in 2017, said a CEO’s priority was to: “define a strategy … and I made it clear. since the first day.”
In a statement to the stock exchange, the company said: “We are encouraged by the pace at which COVID-19 vaccinations are being rolled out in many countries, particularly the United States and the United Kingdom, which are helping healthcare systems to return to normal.
“As a result, we remain confident in the underlying demand for our vaccines, and we expect a strong recovery and contribution to growth in the second half of the year.”
GSK’s partnership with Sanofi to develop a Covid vaccine is not yet out of the starting block. He has agreed to help with the production of US developer Novovax’s candidate starting next month.
Sebastian Skeet, senior analyst at Third Bridge, said: “GSK has endured a rather lackluster 2020 following a number of pipeline setbacks and disruptions from Covid-19. Worryingly, their 2021 performance looks all too familiar.
“Not only did existing challenges such as a muted shingrix recovery, late-stage pipeline setbacks and increased competition around major market assets persisted at GSK, but we saw additional pressures in the form currency and shareholder activism.
Steve Clayton, Director of HL Select UK Income Shares, said: “With a major structural change coming with or without Elliot’s alternate view, it looks like a year of forced evolution at GSK.
“Elliot has a reputation for shaking up underperforming companies and driving strategic change. What they will push at GSK has yet to be seen, but it’s a safe bet that they see more value in taking a different course than what GSK is currently taking. “