GSK: British drugmaker raises profit and sales guidance after earnings beat expectations

GSK raised its full-year profit and sales guidance on Wednesday after its second-quarter earnings beat expectations, helped by strong sales of its shingles vaccine Shingrix and HIV medicines.

The strong results may further help revive investor confidence in CEO Emma Walmsley, coming a year after the company spun off its consumer health business, Haleon, in its most radical shake-up in 20 years.

The British drugmaker has lagged rivals in recent years, with some investors and analysts worried about the strength of its pipeline of drugs in development and costly U.S. litigation over discontinued heartburn drug Zantac.

GSK reckons the spin-off has allowed the company to sharpen its focus on vaccines and infectious diseases and with $7 billion generated by the Haleon spin-off, it can fund deals to bolster a lacklustre drug pipeline.

The London-listed drugmaker said it now expects adjusted earnings per share growth of 14 per cent -17 per cent for the year, up from its earlier expectations of 12 per cent -15 per cent .

Its share price rose around one per cent at the open, with Danni Hewson, head of financial analysis at AJ Bell commenting that it had “delivered a crowd-pleasing performance bolstered by strong sales of both its shingle vaccine and HIV medicines, but there are still big questions for investors to ponder.

“Whilst GSK saw investor confidence rebound slightly after it announced it had settled its first Zantac court case, there’s still a long way to go.

“Its core business might be delivering gangbusters but a drugmaker’s real value is found in its pipeline and there’s nothing in this set of results to set pulses racing.

“It’s only been a year since it split from its consumer business allowing it to focus in on product development and investors appear to have been mollified to a degree by strong sales and a decent near-term outlook, but they will want more than more of the

Sales will likely increase by 8 per cent to 10 per cent this year, compared with 6 per cent to 8 per cent previously and for adjusted operating profit to increase between 11 to 13 per cent , up from 10 per cent to 12 per cent .

“We have delivered another excellent quarter of performance, with strong sales and earnings growth, notably in HIV and vaccines, and continued strengthening of the R&D pipeline and product portfolio,” Walmsley said in a statement.

The company also reported an adjusted profit of 38.8 pence per share for the quarter, on sales of about £7.18bn ($9.26 billion).

Analysts were expecting a profit of 34.7 pence per share on sales of about £6.77bn, according to company-compiled consensus estimates.

Sales of Shingrix, the company’s top-selling drug, generated £880m, beating analyst estimates of £872m.

Sales of HIV treatments generated £1.58bn in the quarter, ahead of the company-compiled consensus of about £1.5bn in the quarter.

New vaccine launch

The results come ahead of the much-anticipated U.S. launch in the autumn of the company’s inoculation against respiratory syncytial virus (RSV), which GSK hopes will be its next blockbuster drug.

It was approved by U.S. drug regulators last month.

RSV is a leading cause of pneumonia in toddlers and the elderly, causing thousands of hospitalisations and deaths each year.

GSK shareholder Markus Manns, senior portfolio manager at Union Investment, said the new guidance was expected after a strong first quarter.

He said he hoped to hear on an investor call later on Wednesday more on the company’s preparations for the RSV vaccine debut.

The results highlighted the strength of GSK’s underlying business driven by HIV and vaccines, Dani Saurymper, a portfolio manager at Pacific Asset Management, and a GSK shareholder, said.

But without an update on the Zantac litigation or change in pipeline outlook, the shares may continue to lag peers, he said.

Reuters/Maggie Fick, Radhika Anilkumar i