The City has cheered GlaxoSmithKline PLC’s (LON:GSK) plan to bring in a huge new restructuring programme aimed at saving the UK’s biggest drugmaker £400mln a year.
Glaxo said it had been re-evaluating its cost base and what was required to deliver “competitive long-term growth”.
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On the back of that, chief executive Emma Walmsley said the FTSE 100 group would look to make substantial savings through supply chain optimisation and reductions in administrative costs.
There is no pain without gain though, and GSK warned the cost-cutting measures would cost £1.7bn over the next three years.
New R&D focus
Walmsley, who celebrates a year in the role next month, also announced a new approach to R&D which will see Glaxo focus on science related to the immune system, the use of genetics and investments in advanced technologies.
Supporting the new strategy was a £228mln (US$300mln) investment in 23andMe, a Silicon Valley gene testing firm whose technology GSK will use to help it select new drug candidates.
Despite the big changes, the company stopped short of announcing a demerger of its consumer division, as had been rumoured over the past few days.
As for the numbers, group sales were flat at £7.3bn on a constant currency basis in the three months ended June 30, while total earnings per share came in at 9.0p (Q2 17: loss of 3.7p), reflecting reduced impairments and lower restructuring charges.
Glaxo’s HIV drugs Tivicay and Triumeq posted sales of £1.1bn in the quarter – a year-on-year rise of 15% at constant exchange rates.
Juluca, the new HIV drug on the block which won approval from US regulators at the end of last year, notched up sales of £24mln in the period.
EPS guidance upgrade
Shingrix sales hit £167mln, and GSK now expects the shingles vaccine to generate full-year sales of between £600-650mln.
The company’s Advair inhaler, one of GSK’s former star assets, saw sales decline by almost a third to £590mln due to competitive pricing pressures.
That said, a delay in the launch of a generic rival in the US has allowed the drugs giant to increase its adjusted earnings per share guidance, and it is now forecasting growth of 7-10% this year.
If a copycat does enter the market later this year, Glaxo is guiding for EPS growth of 4-7%.
Shares were up 1.2% shortly after the update to 1,576p.