GlaxoSmithKline (GSK) beat consensus sales and adjusted earnings forecasts during the first quarter, with revenue up across all segments (pharmaceutical, vaccines and consumer healthcare) compared with the same period last year. Vaccine sales put in a particularly strong showing, propelled upwards by almost a quarter, thanks to shingles vaccine Shingrix.
However, with increasing competition from generics, adjusted earnings per share are expected to decline by 5-9 per cent over 2019. Notably, the US launch of a generic version of asthma drug Advair resulted in a 23 per cent decline in sales during the quarter, translating to a 5 per cent reduction in revenue for the established pharmaceuticals division.
A quarterly dividend of 19p was declared, while management reasserted its intention to build free cash flow cover of the dividend to a target ratio of between 1.25 and 1.5, before increasing payments. With the initial step-down impact from Advair generic competition, free cash flow declined by almost half to £165m during the first quarter. Nevertheless, the pharma giant intends to maintain the annual dividend at 80p a share.
