December 19, 2014
By Riley McDermid, BioSpace.com Breaking News Sr. Editor
The chief executive officer of GlaxoSmithKline is rushing to reassure the market that its dividend is secure despite cutting its profit forecast and increasing concern from analysts.
In a conference call Friday Chief Executive Officer Andrew Witty told analysts worried about the dividend that they can expect the company to ante up its share. The firm said it will splash out 80 pence, or $ 1.25, per share for 2014.
“I don’t think people should be concerned about that,” Witty said in a call after a shareholder meeting discussing new deals the company is doing with Novartis AG .
Witty also reassured analysts that shareholders will get an additional 4 billion pounds when the deals with Novartis close.
Pending regulatory approval, both in the U.S. and in Europe, Glaxo will sell its cancer drug pipeline to the Swiss company for around $16 billion, in exchange for snapping up Novartis’s entire vaccines business for $7.1 billion. The two are also attempting to partner in a joint health venture, the parameters of which have not yet been distinctly defined.
Witty’s remarks appeared to mollify Wall Street for now, initially pushing Glaxo up 2.3 percent in London trading, a gain the stock gave back when morning trading opened in New York hours later.
Glaxo has been a ripe target for bearish analysts this year, after slow growth and whittled forecasts had several predicting the company will have to call in its dividend this year. After Glaxo cut its forecast in July, analysts at Liberum Capital Ltd warned investors that the likelihood of a dividend cut was “increasing dramatically.”
Instead, Glaxo appears poised to pay out a dividend, even at an enormous cost to the company’s bottom line. If it keeps to its initial 80 pence guidance, it will use around 85 percent of its profits to meet dividend calls this year, one of the highest margins in biotech, let alone the wider capital markets.
