By Steve Goldstein, MarketWatch
GlaxoSmithKline shares lost ground on Thursday for a second day as brokers reacted cautiously to the U.K. pharmaceutical giant’s outlook.
GlaxoSmithKline /zigman2/quotes/200381158/delayed UK:GSK -0.62% /zigman2/quotes/209463850/composite GSK +0.61% shares fell over 2% after ending Wednesday down 4.2%. Bank of America said one of its key takes was that divestments will be needed to fund a £2.2 billion ($3.5 billion) restructuring plan, and that it’s cautious on its outlook from 2020 to 2022, in particular from shingles vaccine Shingrix and the HIV franchise.
“We still see a need for GSK to strengthen its relatively weak pipeline ahead of its [spinoff in 2022 of consumer health], and to mitigate the impact of dolutegravir patent expiry in 2028, but see GSK’s geared balance sheet, restructuring costs, and high dividend payout as barriers to achieving this,” said Bank of America analyst Graham Parry, who kept a neutral rating.
Credit Suisse also kept a neutral rating on Glaxo. “GSK are clearly working hard to transform the pharma business by improving the level of innovation, but the headwind of 50% of the current business continuing to decline at a mid-to-high single digit rate is a meaningful drag on the speed of transformation,” the brokerage said.
The broader FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX -0.28% rose 0.3% to 7506.22 after three consecutive gains, as the market continues to recover from concerns over the spreading coronavirus.
Elsewhere, shares of Royal Mail /zigman2/quotes/204213037/delayed UK:RMG -0.94% dropped 6% — on track to finish at a record low — as the company lowered its outlook for letter volumes in the next fiscal year by 1 percentage point to a decline between 7% and 9%. The group said there’s an increased likelihood that its U.K. parcels, international and letters arm will be loss making.
Beazley /zigman2/quotes/209655690/delayed UK:BEZ -0.12% shares jumped 8.3% as the specialist insurer reported a more than tripling of its annual profit to $267.7 million from $76.4 million, as its full-year dividend edged up to 12.3 pence from 11.7 pence.