Glaxo's Vaccines Division Outperforms

FTSE 100 dividend stalwart posts steady results in the first six months and expects better performance in the second half, during which the joint venture with Pfizer will complete

James Gard 24 July, 2019 | 2:16PM
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Shares in GlaxoSmithKline (GSK) crept higher after it reported better-than-expected first-half results, helped by strong growth sales growth in its Vaccines division.

First-half turnover was up 5% at £15 billion, while adjusted operating profit was 4% higher at £4.3 billion.

In terms of group performance, the dominant pharmaceuticals business – with 54% of first-half sales – expanded just 1% in the last six months at constant exchange rates. The Vaccines division grew 22% in the period. Consumer Healthcare was up 2% against the same period in the last financial year.

Ketan Patel, co-manager of the Amity UK Fund at EdenTree, said: "The vaccines division continues to deliver, and investors will be buoyed by management increasing guidance for the financial year. The news flow on the pipeline across a range of therapeutic areas is another positive."

Ian Forrest, investment research analyst at The Share Centre, says these are good results for Glaxo and the shares have reacted positively to positive news on the pipeline for new drugs.

The FTSE 100 pharmaceutical firm still expects to make an earnings per share loss in the earnings for the full year, of -3-5%, but this is an improvement on the -5-9% expected in February this year.

With a yield of just above 5%, the company is a significant contributor to the FTSE 100’s dividend payouts, along with rival AstraZeneca (AZN). Still the dividend is expected to be held at 80p for the full financial year, which is unchanged since 2014 (there was a special dividend of 20p in 2016).

EdenTree's Patel says that Glaxo's debt remains a concern and that the chief executive should look to deleverage to increase the dividend cover and the payout.

During the second quarter, Glaxo lost the exclusive rights to asthma drug Advair as a generic version launched in the US in February 2019. On a positive note, chief executive Emma Walmsley said the company expects to complete its Consumer Healthcare joint venture with Pfizer shortly. The deal was announced in December 2018 and approved by shareholders in May this year.

Glaxo shares are considered as undervalued by Morningstar analysts, who also assign a “wide economic moat” to the firm. Ie. It has a strong competitive advantage. Morningstar’s Damien Conover says that Glaxo’s new product line-up and expansive list of patent-protected drugs are the reasons behind this competitive advantage. The fair value for the shares is £17.90, Morningstar estimates, above the current price of £16.90. The shares are up 11% in the year to date.

"We continue to view the stock as modestly undervalued, with potential long-term growth not fully factored into the share price," says Conover.

Separately, the firm announced that Jonathan Symonds will take over from Philip Hampton as non-executive chairman in September 2019. Symonds is deputy chairman at HSBC and is a former chief financial officer at Glaxo rivals Novartis and Astra.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
AstraZeneca PLC10,946.00 GBX0.29Rating
EdenTree UK Equity Cls A Inc212.10 GBP-0.19Rating
GSK PLC1,599.00 GBX0.98Rating

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James Gard

James Gard  is senior editor for


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