GSK heads to Cambridge with long-awaited positive vibes | Nils Pratley

“A vote of confidence in British business,” trumpeted Andy Burnham, seizing the political gift of GSK splashing out £400m on a shiny new research and development centre in Cambridge.

For positive vibes, it definitely beats the early pharma news his predecessor as prime minister received. That was the painful tale of how AstraZeneca, frustrated by indecision in the Treasury, cancelled its intended £450m expansion of a vaccine plant in Speke in Liverpool.

In reality, GSK’s investment in Britain is a specific one in Cambridge. The group’s historic Stevenage facility will close and most of the scientists (or as many as want to go) will move to the Fens.

One shouldn’t be surprised. Around the world, life sciences companies increasingly gather in clusters. Cambridge – thanks to its university, Addenbrooke’s hospital, various science institutes and a healthy biotech and biopharma start-up scene – is a genuine world-class rival to Boston and Basel. The Cambridge biomedical campus is the natural place for GSK to be in the UK in the interests of “acceleration” of research and development. Only a cynic would suggest literal proximity to AstraZeneca’s facilities could come in handy for a future merger.

The switch of UK research location is the most eye-catching big decision by Luke Miels, the chief executive since the start of the year, but Tuesday’s first-half numbers contained three sources of encouragement for shareholders.

First, GSK thinks it can put at least 20 potential medicines into late-stage trials this year, an increase from 10 at the last count. Part of the boost flows from the near-£8bn acquisition of the US-based cancer specialist Nuvalent last month. But the rest probably owes something to Miels’s focus on which drug programmes should be backed harder and which cut. If the 20-plus target indicates more ruthlessness in prioritisation, investors will applaud. It is easy to talk, as Miels has done, about displaying “scientific courage”, but you still need candidates to come through the drug pipeline to make it happen.

Second, Miels surprised the market with a plan to cut £1.9bn of annual costs by 2029. Even for a company the size of GSK, that’s a big number to find from the general wash of procurement, frontline sales forces, AI efficiencies and a leaner manufacturing presence amid the shift from general medicines to specialist drugs.

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Third, the dark cloud hanging over GSK – the expiry during 2028-30 of patents on the HIV medicine dolutegravir, which accounts for about a fifth of group sales – looks less threatening if the group’s latest forecasting proves correct.

A critical line in the results was the prediction that operating profits margins will be “stable to improving” even during the patent crunch. Thanks to the intended cost savings, that is a notably clearer statement than the group has offered before now. Meanwhile, the grand target of hitting £40bn-plus of revenue in 2031 is “on track” with “accelerating growth” thereafter.

Longstanding GSK shareholders know from experience never to underestimate the scope for disappointment. The past 20 years have witnessed many false dawns; improvements under Miels’s predecessor, Emma Walmsley, ran into bad luck in the form of US litigation over a heartburn drug from the 1990s.

But the tone has definitely improved. It’s still too soon to speak about GSK replicating AstraZeneca’s remarkable 15-year blueprint for growth under Pascal Soriot (which also started with expansion in Cambridge). But the big-picture pieces are falling into place. The 2031 revenue target gets more credible with every telling; the pipeline is fuller; the patent cliff is less daunting; the share price is perkier. Put the merger talk on hold.