GlaxoSmithKline share price stumbles after Full Year results and guidance

GlaxoSmithKline (GSK) Q4 and full year results have shown a marginal decline in revenue and pre-tax profit on a reported basis. On a constant currency basis these figures were however slightly improved (+5% or so).

A summary of the FY21 results is as follows:

• Revenue for 2021 up marginally to GBP34.11bn from GBP34.10bn previously

• Pharmaceutical turnover increased by 4% to GBP17.73 billion

• Vaccines sales declined by 3% to GBP6.78 billion

• Consumer Healthcare turnover declined by 4% to GBP9.61 billion

• Pretax profit fell to GBP5.44bn from GBP6.97bn

• Dividend of 23p declared for Q4 2021; 80p FY 2021

GSK is also planning to demerge its Consumer Healthcare business by mid-2022, in which it will initially hold a minority stake. The company which remains is currently being referred to as new GSK.

The group has issued the following FY22 guidance for new GSK

• New GSK, the biopharma business, is forecast to deliver sales growth in 2022 of between 5% to 7%

• Adjusted operating profit of between 12% to 14% has been guided for FY22 which includes the benefit in royalty income from Gilead settlement

• The 2022 guidance omits any contribution from COVID-19 solutions

Comments on results

GSK results were broadly in line with consensus. Vaccine sales for the group have been soft due to the group not having produced a Covid vaccine to market, although late-stage clinical trials for further treatments are on the go. The global drive towards Covid 19 vaccines has instead displaced some of the demand for the company’s other vaccines. GSK does however offer one of the few treatments (sotrovimab) for Covid, and sales of the product have been good. The expectation is that sotrovimab sales will remain at similar levels to 2021 in 2022, although margins from the product are expected to be around 5% to 7% less profitable due to lower margins considered.

GlaxoSmithKline – Technical Analysis

The share price of GSK is correcting in the short term although the longer-term uptrend remains in place.

The initial support target from the correction is considered at the 1585 level. Should the price move to close below this level trend line support at 1490 becomes a further downside target.

In line with the longer-term uptrend, our preference is to look for long entry on a bullish price reversal before the 1585 support level. If this level was instead broken, we would be looking for a bullish price reversal closer to trend line support for long entry. In this scenario, 1705 becomes our long-term upside resistance target from the move.