GlaxoSmithKline slumps as it diverts dividend cash to drugs pipeline

Shares in Glaxosmithkline sank by Matt Oliver after it warned profits would fall and that it plans to cut the dividend after its break up.

As the British drugs group struck a deal to develop new one-shot vaccines for Covid-19 variants, it said profits were expected to fall this year by a ‘mid-to-high single-digit’ percentage.

In another blow to investors, GSK said dividend payments would be reduced from current levels when its consumer arm is spun off in 2022.

Glaxosmithkline Boss Emma Walmsley (pictured) said cash was needed to bolster the drug giant’s pipeline of medicines

Boss Emma Walmsley said the cash was needed to bolster its pipeline of medicines. The company declared a fourth-quarter dividend of 23p per share, taking its full-year payout to 80p overall. 

After the announcement, shares dropped 5 per cent, or 86p, to 1282p.

GSK said its partnership to develop Covid-19 vaccines with Germany’s Curevac will aim to tackle emerging coronavirus variants, which scientists fear could be resistant to existing jabs. 

The firm will also help to make up to 100m doses of Curevac’s existing Covid-19 vaccine candidate this year.

The deal came as GSK reported full-year sales of £34.1billion for 2020, up from £33.8billion the previous year, while profits rose from £5.3billion to £6.4billion.

Even though the pandemic has boosted demand for GSK’s over-the-counter painkillers, it has simultaneously disrupted other parts of the business as patients under lockdown havemade fewer trips to doctors and hospitals.

That meant that while itsconsumer division posted a 12 per cent rise in sales in 2020, sales at its pharmaceuticals and vaccine divisions fell 3 per cent and 2 per cent respectively.

GSK said it was on track tosplit off its consumer division that includes painkiller Panadol next year.

This will result in two companies: A pure ‘biopharma’ GSK – essentially the original pharma and vaccine businesses – and a new stand-alone consumer drugs business.