GlaxoSmithKline sees profits fall despite £1.4bn Covid related sales

Pharmaceuticals giant GlaxoSmithKline has said its pre-tax profits dropped last year, despite notching up £1.4 billion in Covid-19 related sales.

The firm reported a 22% fall in pre-tax profits to £5.4 billion for 2021 – a 10% decline with currency movements stripped out.

GlaxoSmithKline (GSK) said it remained on track to spin off its consumer healthcare arm by the middle of 2022, having recently rejected a £50 billion approach for the division by Marmite maker Unilever, which it dismissed for being too low.

GSK’s results revealed strong demand for its Covid-19 antibody drug Sotrovimab helped boost pandemic-related sales and expects a similar level this year, but it cautioned over a “substantially reduced profit contribution” due to lower margins on its anti-body treatment.

This is set to reduce underlying earnings growth by between 5% and 7%.

The group said it sold £828 million of Sotrovimab, or Xevudy, in the final three months of the year, which helped drive a 9% rise in sales to £9.5 billion in the quarter.

But fourth quarter pre-tax profits came in lower than expected at £706 million, down 14%, or 8% higher on a constant currency basis.

The group said the full-year drop in earnings was largely down to the sale of Horlicks and other consumer brands, as well as its share in Hindustan Unilever.

On an underlying basis, GlaxoSmithKline (GSK) said operating profits stood at £8.8 billion – 1% lower, but 9% higher on a constant currency basis, as turnover rose 5% to £34.1 billion thanks to strong pandemic-related sales, higher drugs revenues and cost savings amid restructuring efforts.

Without the hit from lower Covid-related sales, it forecast underlying operating profits to rise by between 12% and 14% on a constant currency basis this year on sales 5% to 7% higher.

The group is pressing ahead with a demerger and separate London Stock Exchange listing of its consumer healthcare arm, which includes brands such as Sensodyne toothpaste and Panadol pain relief.

Analysts had previously predicted that the spin-off, which is a joint venture with Pfizer, would be worth around £45 billion, but GSK is said to have been holding out for an improved bid of at least £60 billion from Unilever.

Emma Walmsley, chief executive of GSK, said: “We have ended the year strongly, with another quarter of excellent performance driven by first-class commercial execution, and we enter 2022 with good momentum.

“This is going to be a landmark year for GSK, with a step-change in growth expected and multiple R&D catalysts, including milestones on up to seven key late-stage pipeline assets. 2022 is also the year when we demerge our world-leading Consumer Healthcare business.”