GlaxoSmithKline may not be doing so well compared to peers, City says

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GlaxoSmithKline PLC’s (LON:GSK) pipeline value relative to peers may be weak and its research and development productivity may be poor, City analysts say.

The pharma giant scores below average when compared to peers with poor growth and replacement power product concentration, offsetting good pricing power and limited risk around generics, Credit Suisse noted.

READ: GlaxoSmithKline emerges as unlikely loser of COVID-19 pandemic – but will a return to normality be enough to sort out trouble?

On Wednesday, the company said healthcare systems and consumer trends will approach normality in the second half of the year.

Full-year turnover is expected to be either flat or rise up to 2% for the Pharmaceuticals and Vaccines businesses, and advance by 2-5% for Consumer Healthcare excluding brands divested and under review.

As the group plans to split into two companies in 2022, consumer health and biopharma, the outlook for the latter is regarded as the benchmark for the success of the spinoff.

Chief executive Emma Walmsley announced she will lead the biopharma arm after the separation, which has ruffled some feathers since her background is not in science.

She was an executive at L’Oréal before joining GSK, where she led the consumer healthcare segment before being promoted to replace Sir Andrew Witty in 2017.

“I am not a scientist. I am a business leader. I believe the priorities as the chief executive are to set the strategy and I have clearly laid out from day one our priority there,” she said at a press conference on Wednesday.

“We have thousands and thousands of highly talented, dedicated scientists in this company who get up in the morning to beat disease and to progress our pipeline.”

“The chief executive should be held accountable for results. We have made an enormous amount of change in this super-tanker of a company in recent years. There is definitely more to be made.”

Walmsley’s plans may soon be challenged by Elliott Management, an activist hedge fund that has recently built up a multi-billion-pound stake in the FTSE 100 group.

Analysts believe that the new shareholder will push to restructure the pipeline, although Walmsley’s firm intention to stick with her strategy may leave little leeway.

In any case, JP Morgan said that the shares may be supported by Elliott joining in, which may explain why they didn’t move much following the disappointing quarterly update on Wednesday.

In the three months to 31 March, turnover slid 18% to £7.4bn, with Pharmaceuticals down 12% to £3.9bn, Vaccines down 32% to £1.2bn with Shingrix tumbling 47%, and Consumer Healthcare down 19% to £2.3bn.

Trading was hit by governments prioritising COVID-19 vaccine rollouts and a weak cold/flu season because of efforts to stop viruses from spreading.

Shares remained little moved at 1,336.6p on Thursday afternoon.

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