GSK profits soar but final months of 2020 slow down progress

Pharmaceuticals giant GlaxoSmithKline (GSK) saw a surge in profits last year with consumers turning to vitamins and minerals alongside strong sales in respiratory drugs.

Bosses said the growth offset falls across the year in its traditional vaccine business – primarily its hepatitis vaccines – although there was strong demand in Europe for its Shingles vaccine, Shingrix.

Total sales rose 1% in 2020 to £34.1 billion, with pre-tax profits rising 12% to £6.97 billion for 2020.

But the company struggled in the final quarter of the year, with sales falling 2% to £8.74 billion. Pre-tax profits dropped 52% to £821 million.

Shares closed down 86p, or 6.29%, at 1,282p – falling to a six-year low.

Chief executive Emma Walmsley added that plans to split GSK’s biopharma and consumer healthcare divisions remain on track for completion in 2022.

On the overall performance of the group, she said: “2020 was an extraordinary year for all of us, and one of significant progress for GSK. We invested in our pipeline and new launches, readied the company for separation, and had to rapidly mobilise and respond to the pandemic.

The boss added: “We delivered our guidance for the year, offsetting the significant impact of Covid-19 on adult vaccinations, with strong performances of new products and effective cost control.”

Splitting out the final three months of 2020, GSK revealed turnover in its pharmaceuticals division was down 4% to £4.37 billion, with sale of respiratory medicines up 14%. HIV treatment was down 1% but established pharmaceuticals fell 19%.

Vaccines turnover in the final quarter grew 15% to £2.012 billion, primarily driven by double-digit growth in Shingrix and a strong demand across all regions for GSK’s Influenza vaccine – reversing falls from earlier in the year.

The final quarter saw a fall in consumer healthcare sales by 8% to £2.36 billion, although for the full year the division saw sales rise 12% to £10 billion, with vitamins, minerals, supplements, oral health, pain relief and digestive health all highlighted for growth.

Looking forward, the company said it expects disruption in its vaccines business in the first half of 2021 as governments focus on Covid-19 vaccines over other ones.

The company 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.”

Nicholas Hyett, an analyst at Hargreaves Lansdown, said: “These results are a bit of a mess – with a dozen moving parts and disappointing underlying numbers.”

He added: “GSK is a company in transition – and by 2022 will be starting life as two separate companies.

“While we haven’t always supported breaking the business up, we now think the move can’t come soon enough.

“GSK in its current iteration seems to be struggling to set out a clear vision of what it offers investors. Hopefully its successor companies are a little more streamlined.”