GSK slashed its dividend and set ambitious sales targets as its pressured CEO Dame Emma Walmsley pledged to lead Britain’s second-largest drugmaker through a corporate reshuffle next year.
GSK Separates From Consumer Healthcare Business And Aims To Increase Sales Of The Remaining Pharmaceuticals And Vaccines Business, Tentatively Called “New GSK,” By 5% Per Year Over The Next Five Years, While Profits Are Expected To Increase by 10% per year.
He intends to increase New GSK sales to £ 33bn by 2031, almost as much as the £ 34bn made by the entire group, including consumer health, the last year.
Investors were bracing for a sharp drop in dividends, to 80p per share this year, but will receive better than expected 55p per share next year of total dividends from GSK and the new consumer company. New GSK’s dividend will start at 45p in 2023.
The money saved by the dividend cut will be invested in research and development to strengthen the company’s new drug portfolio.
The targets and the dividend change were laid out on Wednesday in a four-hour live video presentation to investors and analysts amid speculation over Walmsley’s future.
New York-based hedge fund Elliott Management, which took a large stake in GSK in April to push for change, reportedly questioned whether Walmsley was the right person to lead New GSK.
Speaking Wednesday ahead of the meeting, Walmsley said: ‘Let me tell you what I am. I am a change agent, I am a business leader and I am very excited about the new plans for a new GSK that we are putting in place today. I led and led very hard a change towards a more performance oriented company… My goal is resolutely to guide us through this transformation, through a successful separation and with a momentum beyond.
GSK is splitting at least 80% of its stake in the consumer healthcare business in mid-2022, with the remainder to be sold when market conditions permit.
Walmsley said it was designed to be “very, very shareholder friendly.” Existing GSK shareholders would receive shares of the new consumer company, with brands such as Panadol, Sensodyne and Voltaren, which will be listed in London and New York. Some analysts had advocated a first public listing to raise funds.
Walmsley highlighted the achievements since inheriting a pipeline of phased-out drugs four years ago, including a more than 30% increase in R&D spending, producing a suite of 20 vaccines and 42 drugs.
“I am very aware that GSK stocks have underperformed for a long time,” she said. “The transformation achieved over the past four years creates a completely different platform for growth and significant shareholder value. “
She told investors, “It’s a company that has always disappointed,” adding that GSK was created for “a radical change in performance from our history and a commitment to competitive growth”.
The GSK share price ended the day up 1% at £ 14.09.
Mike Fox, Senior Fund Manager at Royal London Asset Management, shareholder of GSK, said: “This updated strategy takes the needle at GlaxoSmithKline from a focus on restructuring to a story focused on growth. The goals show that management is ready to be responsible for this growth, fostering a better shareholder experience, and we look forward to working with them to achieve it. “
The company targets high single-digit percentage growth for vaccines and double-digit growth for specialty drugs over the next five years.
Peter Welford, analyst at Jefferies, said the group needed “to build confidence in the pipeline.” The practice focuses on cancer, immunology, respiratory drugs and infectious diseases, as well as vaccines.
GSK has also developed a long-acting injectable anti-HIV drug, the main ingredient of which can also be used to prevent HIV infection. Known for her shingles, cervical cancer and influenza vaccines, she is also developing vaccines against meningitis and RSV (respiratory syncytial virus), a common virus that can lead to hospitalization in the elderly. He estimates that the RSV vaccine market for the elderly is worth £ 5 billion a year.