GSK shares slump amid vaccine weakness and restructuring costs
GSK shares fell sharply after investors focused on weaker vaccine sales, restructuring costs and the company’s longer-term outlook, despite quarterly revenue rising and results beating expectations. The reaction reflects concerns about whether growth in medicines for HIV, cancer and lupus can offset pressure on vaccines and the future loss of patent protection for a major HIV drug.
Pre-tax profit fell 19% to £1.9bn in the July to September quarter, while turnover rose 5% to £8.9bn at constant currency rates. Vaccine sales fell 2% to £2.6bn, including declines of 5% for Shingrix and 24% for Arexvy; GSK also reported £318m in restructuring charges and expects total costs of £2.4bn, with about 1,200 job losses anticipated in Belgium. The company maintained its annual forecasts and is targeting more than £40bn in annual revenue by 2031.
In short
- GSK shares fell as much as 7% despite higher quarterly revenue.
- Vaccine sales slipped, while restructuring is expected to cost £2.4bn.
- Investors are watching the future patent loss of a major HIV drug.
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The case for
Investors may see the share-price fall as a reasonable response to risks beneath the headline revenue growth: vaccine sales declined, restructuring costs weighed on profit, and a major HIV drug will eventually lose patent protection. They may doubt that growth in HIV, cancer and lupus medicines will offset those pressures quickly enough to meet the company’s longer-term ambitions.
The case against
The results also offer reasons not to read the quarter as evidence of a weakening business: revenue rose, results beat expectations and GSK maintained its annual forecasts. Vaccine declines and restructuring charges may be temporary or manageable, while investment and growth across its medicines could support the company’s stated ambition to exceed £40bn in annual revenue by 2031.
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Originally published by The Guardian as “GSK shares dive as weaker sales and mounting costs unnerve investors”.