It hasn’t taken long for new broom Emma Walmsley to make her mark at GlaxoSmithKline PLC (LON:GSK) as the newly installed chief executive used the company’s quarterly results to announce a major overhaul of the lumbering drugs titan.
More than 30 pre-clinical and clinical programmes will be stopped, divested or partnered out as part of the restructuring designed to improve returns from the pharmaceuticals arm. It is also mulling options for its Rare Diseases business.
GSK said it expects to deliver an additional £1bn of annual cost savings by 2020.
READ: GSK confirms plans to sell Horlicks in the UK and cut 320 jobs as it prioritises drugs business
HIV to get more cash
At the same time, Walmsley, who was appointed boss in April, will allocate more of the company’s capital to the HIV and infectious diseases operations.
Oncology and immuno-inflammation projects can also expect more cash to be thrown at them.
The restructuring plans were announced alongside second-quarter results, which revealed earnings per share came in slightly ahead of forecast at 27.2p (up 12% year on year).
Revenues grew at the same pace to a better-than-expected £7.32bn.
GSK reiterated its view that sales will increase by mid-to-high single digits annually over the next three years.
READ: GlaxoSmithKline makes submissions for key HIV single-tablet treatment to both the EMA and the US FDA
Earnings guidance trimmed
Not entirely unexpected was the trimming of full-year earnings guidance.
That said, it precipitated a modest sell-off with the stock down 2.50% in afternoon trade to 40.90p.
“In terms of the strategy update, the dividend now looks safe (as we expected) whilst there is an additional £1bn of cost savings and confirmed long range guidance we continue to believe is conservative and anyway not reflected fully in consensus,” said London broker Liberum.
“The R&D focus on respiratory, HIV and immuno-inflammation looks sensible; we expect one focus at the investor [and] analyst meeting later today to be on how they plan to execute in oncology, also named as a focus.”
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