A sharp sell-off in GSK (GSK.L) stock on Wednesday signalled deep investor unease, with shares dropping 7% in morning trading despite the drugs giant beating profit expectations.
The culprit was a disappointing vaccine division, where quarterly revenues slipped 2% to £2.6 billion in the three months ending September 30.
Two of the company’s flagship vaccines drove the decline, with shingles treatment Shingrix posting a 5% drop and RSV shot Arexvy suffering a steeper 24% fall amid weakening demand in the United States.
The retreat in vaccine revenues overshadowed what was otherwise a solid set of numbers for the British pharmaceutical group, which is listed on the FTSE 100.
Core operating profits, stripping out exceptional items and currency movements, climbed 5% to £3.08 billion, comfortably ahead of the £2.93 billion analysts had anticipated.
Pre-tax profits told a different story, however, falling to £1.94 billion in the quarter compared with £2.5 billion during the same period a year earlier.
Bright spots emerged elsewhere in the business, with speciality medicines revenues growing 15% and cancer treatments delivering a 23% jump, helping cushion the vaccine shortfall.
Chief executive Luke Miels, who took the helm relatively recently, sought to emphasise the company’s direction, saying: “We remain focused on operational delivery, execution and accelerating research and development.”
Yet analysts were not entirely reassured, with Dan Coatsworth, head of markets at AJ Bell, highlighting the scale of the challenge ahead for the new chief executive.
Coatsworth said: “Chief executive Luke Miels is under pressure to build up a pipeline of new drugs ahead of a patent cliff with the loss of exclusivity on its blockbuster HIV drug Dolutegravir.”
He acknowledged some forward momentum but cautioned that Wednesday’s results exposed lingering vulnerabilities, adding: “However, the latest update is a reminder Miels still has plenty of work to do.”
The looming patent expiry on Dolutegravir, one of GSK’s most important HIV treatments, has been a central concern driving the company’s sweeping restructuring efforts in recent months.
GSK announced plans earlier this year to cut annual costs by £1.9 billion over three years, with the savings earmarked to fund investment and bolster its research and development programme.
As part of that overhaul, the company confirmed it would close its principal R&D hub in Stevenage and relocate to a new flagship research site in Cambridge.
Job losses have accompanied the shake-up, with around 350 R&D positions eliminated across the UK and US, and further support services roles affected by cost-cutting measures announced in July.