GlaxoSmithKline forecasts decline in 2021 earnings, shares slump

(Sharecast News) - Shares of GlaxoSmithKline slumped on Wednesday after the pharmaceuticals giant said it expects 2021 earnings to decline, as it reported growth in revenues and profit for 2020.
Glaxo said group turnover rose by 3% at constant exchange rates to £34bn, with pre-tax profit up 16% to £6.97bn.

The company said it remains on track for the separation of its business into standalone biopharma and consumer healthcare companies next year.

It also provided guidance for 2021, saying it expects a decline of mid to high-single digit percent adjusted earnings per share at constant exchange rates.

"For our vaccines business, we now anticipate further disruption during the first half of the year, given governments' prioritisation of Covid-19 vaccination programmes and the resurgence in late 2020 of the pandemic," it said.

"This is expected to impact adult and adolescent immunisations, including Shingrix, notably in the US. Despite this short-term impact we remain very confident in demand for these products, and expect strong recovery and contribution to growth from Shingrix in the second half of the year. We expect vaccines revenue for 2021 to grow flat to low-single digits."

Chief executive officer Emma Walmsley said Glaxo had delivered its guidance for 2020, offsetting the significant impact of the pandemic on adult vaccinations, with strong performances of new products and effective cost control.

"Importantly, progress against our strategic goals remains firmly on track," she said. "We are building a high value biopharma pipeline, have substantially integrated our Consumer JV and have delivered all our first year targets for our two year separation programme. This means we are in a strong position to launch new competitive, standalone biopharma and consumer healthcare companies in 2022."

At 1235 GMT, the shares were down 4% at 1,314p.

Julie Palmer, partner at Begbies Traynor, said: "The pandemic may have come at a bad time for GSK, with the drug maker currently mid-way through a restructuring program, but it could prove beneficial for the company in the year ahead as a global effort continues to tackle the virus.

"Although the pharmaceutical giant has been late to the party with its Covid-19 vaccine, research trials are focusing on greater efficacy, while the company has the logistical capacity to manufacture and distribute products globally once the drug is approved. This compares to rival vaccines that have already been rolled out and faced significant scrutiny regarding their distribution and effectiveness.

"For long term protection, it will be companies such as GSK that have the most reliable trials and can mass produce cost-effectively that governments turn to. If the business can get its strategy right, it will be just what the doctor ordered for its investors."

Earlier in the day, GlaxoSmithKline announced a new €150m collaboration with Germany's CureVac to develop a vaccine to combat emerging variants of Covid-19.