GSK made £1.4bn from Covid-related medicines last year, beating forecasts in its first financial results since rejecting Unilever’s £50bn buyout offer in December, as the chief executive, Emma Walmsley, pledged a “step-change in growth” in a landmark year.
The company is under the spotlight after promising to raise billions by spinning out its consumer arm, whose over-the-counter brands include Nicorette, Panadol and Aquafresh, in a London stock market listing this summer.
GSK reported total sales of £34bn for 2021, in line with last year. The consumer healthcare business contributed £9.6bn, down 4% from 2020. GSK’s annual profit before tax fell to £5.1bn, from £6.4bn in 2020.
In the final quarter of the year, turnover rose 9% to £9.5bn, slightly ahead of analysts’ forecasts, while earnings per share were also better than expected at 25.6p. Analysts at Morgan Stanley and Goldman Sachs described the results as “solid”.
Walmsley is under pressure from the activist investor Elliott Management, a New York hedge fund, which is clamouring for change along with the much smaller London-based Bluebell Capital Partners. Both have pushed for a sale of the consumer business. However, GSK recently rejected three offers from Unilever as too low, the last of which was worth £50bn, and Unilever walked away. Elliott and Bluebell have also demanded that Walmsley reapply for her job, but she insists that she will continue to lead the drugmaker after its split.
Walmsley said the company had “very broad shareholder support” for its pursuit of a consumer spin-off. “We have a lot of encouragement to stay focused on the successful execution of this demerger, the creation of what we think is a very exciting big player on the FTSE,” she told journalists.
Unlike rivals, GSK has not developed a Covid-19 vaccine, but its Xevudy (sotrovimab), an injected antibody drug, was approved by the UK drugs watchdog in early December. Trials found it cut the likelihood of hospital admission and death by 79% in people with mild to moderate Covid-19 who are at high risk of developing severe disease. It was found to be effective against the Omicron variant.
The drug brought in £958m of sales while GSK’s pandemic adjuvant, a formula added to Covid vaccines developed by others to make them more effective, generated sales of £447m.
Aside from Xevudy, GSK received US regulatory approval last year for the cancer drug Jemperli and Apretude, a long-acting injection for HIV prevention. The focus now is on new products, such as a respiratory syncytial virus (RSV) vaccine for older adults, with late-stage clinical trial results expected by June.
The company needs to replenish its drugs pipeline, and has been dealt a blow by the forthcoming departure of its chief scientific officer Hal Barron, a highly respected US scientist who is joining a Californian startup backed by the Amazon founder Jeff Bezos. He will be replaced by Tony Wood in August.
Walmsley brushed off any concerns and said: “This is going to be a landmark year for GSK, with a step-change in growth expected and multiple research and development catalysts, including milestones on up to seven key late-stage pipeline assets.
“We are now in full countdown mode to demerger and our aim is to unlock the potential of both GSK and consumer healthcare, strengthen GSK’s balance sheet and maximise value for all shareholders.”
She said GSK would set out the future growth ambitions and the financial profile of the consumer business at an investor event on 28 February. The remaining pharmaceuticals and vaccines business, called New GSK, is expected to deliver sales growth of 5-7% at constant exchange rates this year, compared with 5% growth last year for the whole group. This is higher than analysts were expecting.
GSK’s vaccines sales dropped 10% to £1.8bn last year, as countries’ normal vaccination programmes were disrupted by the Covid-19 vaccination drive, hitting sales of the drugmaker’s shingles and meningitis jabs.
