GSK raises margin outlook, plots $2.5 billion restructuring to fast-track new drugs

By Bhanvi Satija and Raechel Thankam Job

LONDON, July 28 (Reuters) - GSK launched a £1.9 billion ($2.52 billion) cost-savings effort on Tuesday to help fund the British drugmaker's expanded late-stage study roster, as CEO Luke Miels works to deliver on his promise of faster drug development.

The restructuring is a major step by Miels to reassure investors that GSK can navigate a looming patent cliff for its blockbuster HIV drug, dolutegravir, between 2028 and 2030.

GSK said it now expects to start 25 late-stage studies by the end of 2026, more than double its previous target of 10, after a portfolio review identified seven experimental medicines that it will test across 18 indications.

Shares of the drugmaker rose as much as 7% as it raised its mid-term margin forecast and reported second-quarter profit and sales above analysts' expectations. The stock closed up 4% at 2,041 pence on Tuesday.

GSK upgraded its operating margin outlook for that period to "stable to improving," compared with previous guidance of "stable."

GSK has also stepped up acquisitions under Miels, including a record $10.6 billion deal for Nuvalent in June, as it rebuilds its cancer business. Three of the seven drugs identified for faster development were cancer medicines.

Additional costs related to the Nuvalent deal will weigh on profit this year. GSK now expects core earnings per share growth at the lower half of its 7% to 9% range.

The company maintained its full-year sales growth forecast of 3% to 5%, noting turnover would likely hit the upper half of that range.

RESTRUCTURING, RELOCATION

GSK expects to incur £2.4 billion ($3.19 billion) in costs to implement its savings plan. The savings will come from AI-led technology shifts, streamlining support services and supply chains, and reallocating resources to specialty medicines.

The company did not specify how many jobs would be affected. "We're not going to give a number today ... because I want my team to have the chance to discuss this with our people first," Miels told journalists on a conference call.

A major portion of the savings will be used to fund the late-stage trials and a move of GSK's R&D operations from Stevenage to Cambridge, which represents a £400 million investment in the UK.

"They can collaborate with key individuals in that area ... I think that's a smart move for GSK in the longer term," said James Eugene, analyst at GSK shareholder Verso Investment Management.

LOOKING FOR NEXT GROWTH DRIVERS

GSK's second-quarter results included a one-time £1.33 billion ($1.77 billion) impairment charge after it stopped development of its experimental chronic cough drug, camlipixant, which recently failed in a key study.

Analysts view the pipeline expansion and recent deals as vital to hitting GSK's target of over £40 billion ($53.20 billion) in annual sales by 2031, an ambition the company reiterated on Tuesday.

"We think the critical components for growth at GSK over the next decade are visible," Miels said.

While Barclays analysts called the cost-savings plan and improved margin outlook "key positives" that offset the lack of a new sales target, others urged caution.

"Overall the ambition is heading in the right direction but we think the market will wait for delivery," said Citi analysts, who maintained a "Neutral" rating on the stock.

GSK reported second-quarter revenue of £8.41 billion and core profit of 50.5 pence per share, beating expectations of £8.24 billion and 47.1 pence in company-compiled consensus.

($1 = 0.7518 pound)

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(Reporting by Raechel Thankam Job, Sri Hari N S and Unnamalai L in Bengaluru, and Bhanvi Satija in London; Editing by Vijay Kishore, Joe Bavier and Matthew Lewis)