GSK cuts Novartis payout as first-quarter revenues rise but earnings ease

Core operating profit was down 14% on a constant exchange rate basis at £1.31bn and core earnings per share were down 17% at 17.3p, while profit attributable to shareholders surged to £8.09bn from £0.67bn in 2014.

The pharmaceutical giant said it expects to pay an annual ordinary dividend of 80p for each of the next three years.

However, it has reduced the amount of money it will return to shareholders from the net proceeds of its transaction with Novartis to £1bn, which will be paid as a special dividend alongside the fourth-quarter payout.

Last year, Glaxo agreed a deal with Novartis whereby it would sell it its oncology portfolio, buy Novartis’ vaccines business and the two would create a joint consumer healthcare business.

Glaxo said it has decided to keep its existing holding in its HIV joint venture ViiV Healthcare, having previously considered an initial public offering for a minority stake in the venture.

Chief executive officer Sir Andrew Witty said: “We believe the group's new composition strengthens our ability to offer cost effective healthcare options to payors and governments and enables us to increase access for patients and consumers to our products.”

The market was impressed, sending the shares up 2.2% in the 90 minutes after the results were published.

The ViiV news and special dividend cut were bitter pills for investors to swallow, said analyst Richard Hunter at Hargreaves Lansdown, leaving them to ponder one central question: "whether to roll with the punches in 2015, or whether to buy into the growth which should begin to gain traction in 2016 and beyond".

He said this year looked like one of continuing overall difficulty, despite a reasonably robust first quarter, with earnings per share persisting to "fall off a cliff" as the possibility of generic and pricing competition for respiratory drug Advair continues and the initial hits from the Novartis transaction began to bite.