GSK targets GBP1.9 billion in cost savings as profit beats forecast

GSK PLC on Tuesday said it was planning a cost savings drive to fund investment in late-stage drug development as it reported second quarter results ahead of expectations.

The London-based pharmaceuticals maker reported core operating profit of £2.80 billion in the quarter ended June 30 compared with £2.63 billion the year prior. Core earnings per share increased to 50.5 pence from 46.5p.

Pretax profit totalled £2.68 billion, up from £2.50 billion.

Pretax profit and core EPS outstripped company compiled consensus of £2.52 billion and 47.1p respectively.

In response, shares in GSK, which were 1.0% higher in London ahead of the results release traded 3.0% higher at 2,020.00 pence each shortly after midday.

GSK said higher operating profit and core EPS reflected higher sales and favourable product and regional mix, partly offset by increased investment in R&D and new asset launches and lower royalty income.

Turnover in the quarter rose 5.3% to £8.41 billion from £7.99 billion, and by 5% at constant currency, ahead of £8.24 billion consensus.

Within this Specialty Medicines sales grew 14% on-year to £3.8 billion, beating £3.71 billion consensus, with Respiratory, Immunology & Inflammation sales up 19%, Oncology sales up 17% and HIV sales up 10%.

Vaccines sales up 8% to £2.3 billion were ahead of £2.11 billion consensus with Shingrix up 3%, Meningitis vaccines sales up 21% and Arexvy more than doubled.

But General Medicines sales fell 9% to £2.3 billion, below £2.42 billion consensus, with Trelegy revenue down 7%.

Chief Executive Luke Miels said GSK has identified late-stage pipeline accelerations - across 18 indications - for seven key assets in Oncology, Respiratory, Hepatology and Vaccines.

"Based on clinical data, and their opportunities to improve upon current standards-of-care, we see strong reasons for all these assets to bring meaningful benefits and protection to patients," he added.

To support this, GSK said a new flagship research & development centre is to be established in Cambridge. The existing site in Stevenage will be closed.

Alongside the move to Cambridge, GSK will also upgrade its existing R&D laboratories at Ware in Hertfordshire.

To fund the investment in the late-stage portfolio and R&D, GSK is starting a 3-year cost savings programme to simplify the organisation and to reallocate capital and resources. It aims to improve operating margin with £1.9 billion annual savings targeted by 2029 for costs of £2.4 billion.

"We believe these plans, together with continued disciplined capital allocation, will drive strong operational performance and shareholder returns over the next five years, delivering our 2031 sales outlook and accelerated long-term growth," said CEO Miels.

GSK left full-year guidance unchanged at 3% to 5% sales growth from £32.67 billion in 2025, and 7% to 9% core operating profit/core EPS growth from £9.78 billion and 172.0p each respectively.

GSK said it is on track for 2031 sales outlook of more than £40 billion with accelerating growth from 2031 onwards.

A dividend of 17p per was declared and GSK said a 70p payout is expected for the full-year.

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