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Emma Walmsley, CEO of GlaxoSmithKline, attends a meeting held by President Donald Trump with the Coronavirus Task Force and fellow pharmaceutical executives, at the White House in Washington, D.C. on March 2, 2020. Photo by Kevin Dietsch/Pool/Sipa USA

Emma Walmsley, CEO of GlaxoSmithKline. Photo: Press Association

GSK (GSK.L), lagging behind in the COVID-19 vaccine race, said its operating profit took a hit in the first quarter of 2021, not long after news that activist hedge fund Elliott Management had built up a multi-billion pound stake in the pharma giant.

Shares ticked up roughly 0.5% on Wednesday afternoon.

The company said it saw strong growth in new pharmaceutical products, but that this was offset by stocking and pandemic disruption. It was hurt by reduced patient visits to GPs and a muted colds and flu season as people wear masks and remain indoors.

Adjusted operating profit fell 30% in the period, down to £1.9bn ($26bn) while turnover was £7.4bn, down 18%.

Its pharmaceuticals turnover was £3.9bn, down 12% AER, “reflecting the continued impact of the COVID-19 pandemic, including the stock build in Q1 2020 and lower demand for antibiotic products in Q1 2021”.

GSK's stock ticked up on Wednesday afternoon. Chart: Yahoo FinanceGSK's stock ticked up on Wednesday afternoon. Chart: Yahoo Finance

GSK’s stock ticked up on Wednesday afternoon. Chart: Yahoo Finance

It said its vaccine business was hurt because governments have prioritised the rollout of their COVID-19 vaccination programmes. 

“This was expected to impact adult and adolescent immunisations, including Shingrix, notably in the US and this is reflected in our first-quarter 2021 vaccines performance,” it said. Shingrix, its vaccine against shingles, saw revenue slump 47%.

CEO Emma Walmsley, who is sure to face questions about Elliott’s recent moves, said: “We continue to expect a significant improvement in performance over the remainder of the year and reconfirm our guidance for 2021 and 2022 outlook.”

She touted the launch of Cabenuva for HIV, phase III trials for its respiratory syncytial virus vaccine and a new long-acting treatment for severe asthma as “key milestones”.

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The company is planning to separate its consumer arm next year: “Separation plans are also well underway and we look forward to sharing our strategy and growth outlook for New GSK with investors in June,” said Walmsley.

“The reduction in profits has led to a weak quarter for cash generation at GSK, and the company needs to show that they can improve this going forward,” said Steve Clayton, manager of the HL Select UK Income Shares fund, which has a position in GSK.

“Strip out some of the one-off changes to customer behaviour due to COVID-19 and the company has some encouraging underlying progress to talk about,” he said, such as new treatments in respiratory and cancer 

“As GPs return to normal operations GSK’s Shingrix vaccine for shingles should return to strong growth,” he added.

GSK is under investor pressure as it lags behind in the vaccines race compared to rivals such as AstraZeneca (AZN.L) and as Elliott builds up its stake. While there was no word on Elliott in the results, Clayton said “Elliot have a reputation for shaking up underperforming businesses and driving strategic change.”

“What they will push for at GSK is yet to be seen, but it’s a safe bet that they see more value taking a course different from that which GSK is currently following. With major structural change on the cards at GSK, with or without Elliot’s alternative vision, it looks set to be a year of forced evolution at GSK.”

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