Shares in drugs titan GlaxoSmithKline PLC (NYSE:GSK, LON:GSK) eased in New York Wednesday as new boss Emma Walmsley announced a major overhaul of the lumbering drugs titan alongside its quarterly numbers.
The rationale behind the move is to remove certain drugs from programs in a bid to improve returns in its main pharma business.
Shares in New York dropped 0.66% to US$41.96 each.
More than 30 pre-clinical and clinical programmes will be stopped, divested or partnered out as part of the restructuring.
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.
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.
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 1.6% in afternoon trade, wiping £1bn from the value of GSK.
“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.”