GSK needs no medicine despite talk of poor performance

If you had reinvested your dividends along the way, you would have enjoyed a 116% return on your money by owning GlaxoSmithKline shares in the nine years since Sir Andrew Witty became chief executive. That record is much better than the FTSE 100 index’s, but poorer than AstraZeneca’s, which is one reason why the perception persists that GSK has been a laggard.

In its sharpest form, the theory runs that GSK would be better broken up into its constituent parts – pharmaceuticals, consumer healthcare and vaccines, plus the ViiV joint venture in HIV therapies. Lauded fund manager Neil Woodford once described GSK as being four FTSE 100 companies bolted together.

Witty, as he heads for the exit next month, refrained from taking a serious pop at the break-up brigade, but he would have been entitled to do so. GSK, with 100,000 employees, may seem out of tune with the fast-and-nimble mantra, but its structure – cemented via an asset swap with Novartis in 2015 – works. Witty was able to boast that all three main divisions are currently increasing their profit margins and gaining market share. “Those are for me quite hard-edged demonstrations of performance,” he said. Fair point.

In pharmaceuticals – focus of many of the grumbles – there is no evidence that innovation has suffered. About 27% of the division’s sales are being generated by products launched in the past decade, a high score on a measure the industry regards as important. That ratio is flattered, in…

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