Publish date:

GlaxoSmithKline to Spin Off Consumer Division, Cut Dividend

GlaxoSmithKline rose after the drug titan said it would spin off its consumer division and likely slash its dividend 31%.
Author:

GlaxoSmithKline  (GSK) - Get Report shares rose after the drug titan said it would spin off its consumer division and likely slash its dividend 31%.

The company unveiled the moves at an investor update on Wednesday.

“The separation of Consumer Healthcare is expected in mid-2022,” the company said.

“The new Consumer Healthcare company will have a portfolio which generated annual sales of more than 10 billion pounds ($14 billion) in 2020 and is well-positioned for further growth.”

In April, media reports said activist investment firm Elliott Management had acquired a large stake in Glaxo, the size of which wasn't disclosed. 

As for the dividend, GSK projects it will total 80 pence ($1.12) this year and then slide to 55 pence (77 cents) next year.

TheStreet Recommends

“New GSK will adopt a progressive dividend policy targeting a dividend payout ratio equivalent to 40% to 60%, starting at 45 pence per share in 2023, the company’s first full year of operation.”

Investors reacted positively to the news, with Glaxo recently trading at $40.83, up 4.5%. The stock has gained 8% over the past six months.

Glaxo also said it expected to widen its adjusted operating-profit margin from the mid-20s percent in 2021 to more than 30% by 2026.

And the new GSK "will prioritize R&D and commercial investment in vaccines and specialty medicines, which are expected to grow to around three-quarters of company sales by 2026.”

Earlier this month, Glaxo agreed to pay up to $2.1 billion for ITeos Therapeutics  (ITOS) - Get Report to develop cancer drugs.

The companies unveiled a deal to co-develop and co-commercialize EOS-448, a monoclonal antibody in Phase 1 development as a potential treatment for patients with cancer.