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GSK Beats on Q2 Earnings & Sales, Raises 2023 Guidance
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GSK plc (GSK - Free Report) reported second-quarter 2023 adjusted earnings of 97 cents per American depositary share (“ADS”), beating the Zacks Consensus Estimate of 85 cents. Adjusted earnings rose 12% year over year on a reported basis and 16% at a constant exchange rate (CER).
Quarterly revenues rose 4% on a reported basis and on a CER basis to $8.97 billion (£7.18 billion), beating the Zacks Consensus Estimate of $8.49 billion. This upside can be attributed to the rising HIV and Vaccine sales, which partially offset the declining COVID-19 product sales.
GSK reports financial figures under three segments — Specialty Medicines, Vaccines and General Medicines.
Segment Discussion
Sales in the Specialty Medicines segment fell 7% at CER, due to the declining Xevudy sales. Excluding Xevudy sales, revenues from the Specialty Medicines segment were up 12% at CER. Sales growth of HIV and respiratory drugs was also strong.
GSK did not record any Xevudy sales during the second quarter compared with £31 million in first-quarter 2023. GSK markets Xevudy in collaboration with Vir Biotechnology (VIR - Free Report) . Last year, the FDA withdrew the emergency use authorization (EUA) granted to GSK/Vir Biotechnology’s Xevudy. The withdrawal decision for the Vir Biotechnology-partnered antibody therapy was based on data that showed that it was unlikely for the Xevudy dose to be effective against the Omicron variant.
HIV sales increased 12% at CER, driven by sales growth of new HIV drugs — Juluca, Dovato, Cabenuva, Rukobia and Apretude. GSK markets Juluca in collaboration with J&J (JNJ - Free Report) .
GSK generates the majority of its HIV sales from its dolutegravir franchise, comprising three-drug regimens — Triumeq and Tivicay — and two-drug regimens — Dovato and J&J-partnered Juluca. The launch of the two-drug regimens has been eroding sales and market share of the three-drug regimens following their launch. During the second quarter, GSK and J&J’s Juluca and Dovato contributed almost 38% to total HIV sales.
While sales of the dolutegravir franchise were up 5% at CER in the U.S. market, they were flat in Europe. In International markets, sales were up 6% at CER.
Sales of Triumeq declined 16% at CER, while Tivicay sales remained flat.
Sales of the immuno-inflammation drug, Benlysta, were up 19% in the quarter, reflecting growth across all regions.
Sales of the respiratory drug, Nucala, were up 15% at CER during the quarter, driven by growth in ex-U.S. markets.
Oncology sales were down 3% year over year. This downside was due to lower Blenrep sales that fell 73% during the quarter following thedrug’s withdrawal from the U.S. market last November.
Sales of Zejula fell 2% at CER in the quarter. The recently-launched Jemperli added £25 million to the top line in the second quarter compared to £11 million in first-quarter 2023. The uptick was driven by new patient starts in the United States.
Sales of General Medicines were up 8% at CER during the quarter. Loss of sales from established drugs due to generic competition was more than offset by the strong sales growth of respiratory drugs, Trelegy Ellipta and Seretide/Advair and the post-pandemic recovery of Augmentin and Avodart sales. A few established drugs like Avamys and Anoro Ellipta also demonstrated sales growth.
Trelegy Ellipta sales surged 30% year over year, owing to strong growth in all regions. Sales of Anoro Ellipta were up 19% at CER during the second quarter. Key established drug Advair/Seretide sales rose 26% year over year. Sales on Revlar/Breo Ellipta were down 6% at CER year over year.
Vaccine Sales Rise
GSK’s second-quarter vaccine sales increased 18% at CER, driven by geographical expansion and market growth for Shingrix vaccine. GSK also recorded sales of £41 million from COVID-19 booster vaccine co-developed in partnership with Sanofi, all of which were generated from outside the United States.
Shingrix sales rose 20% at CER during the quarter due to geographic expansions and increased demand in ex-U.S. markets.
In Meningitis vaccines, Bexsero sales were up 18%, while sales of Menveo fell 4%. Sales of the influenza vaccine, Fluarix, were down 28% at CER. Sales of Established vaccines were up 13% year over year.
Operating Expenses
Adjusted selling, general and administration (SG&A) costs increased 11% year over year at CER to £2.19 billion. The upside in SG&A costs was due to launch of products in the Specialty Medicines and Vaccines segments.
Research and development (R&D) expenses rose 13% year over year at CER to £1.32 billion due to continued investment by management for pipeline advancement.
Raises 2023 Guidance
GSK raised its guidance for 2023. The company now expects sales to increase 8-10% in 2023 compared with the previously-issued guidance of 6-8%. The uptick in guidance can be attributed to strong growth momentum observed in sales in the HIV portfolio and General Medicines segment in first-half 2023.
Management expects sales of specialty medicines to increase high single-digit percentage at CER in 2023 (previously mid-to-high single digit growth was anticipated), while vaccine sales are still expected to grow in the mid-teens percentage at CER. Management expects single-digit percent growth in the General Medicines segment’s turnover, which was previously expected to remain broadly flat or fall slightly.
GSK expects adjusted operating profit growth to increase between 11% to 13% at CER (previously: 10% to 12%). The company also raised the guidance for its adjusted EPS, which is anticipated to grow in the range of 14-17%, a two-percentage point rise from the previously-issued guidance of 12-15%.
The above guidance excludes any revenues from its COVID-related products. GSK does not expect significant COVID-19 related sales in 2023. If management were to add COVID sales, it expects a reduction of approximately 8% in turnover growth and a decline in adjusted operating profit growth by 4-5%.
Shares were up in pre-market trading on Jul 26 likely due to the uptick in the financial guidance for 2023. In the year so far, the stock has gained 1.6% against the industry’s 11.3% fall.
Image Source: Zacks Investment Research
Though GSK expects continued growth in turnover in second-half 2023, it expects lower growth in HIV and General Medicine sales in second-half 2023 when compared to the year-ago period. Management also expects the adjusted operating profit growth in second-half 2023 to be higher than the first half.
Our Take
GSK’s Q2 results beat were better than expected as it beat estimates on both counts. In addition, the company also raised its financial outlook for 2023, which was expected following a strong performance reported during first-half 2023. Excluding COVID-19 products, sales rose across all segments especially in the HIV portfolio and for Shingrix. The results are likely to reinvigorate investor confidence in company’s pharmaceutical business following the spin-off of its Consumer Business into Haleon.
During the quarter, GSK also completed the acquisition of Bellus Health and strengthened its respiratory pipeline with the addition of camlipixant, a late-stage candidate being evaluated in adults with refractory chronic cough.
In the upcoming quarters, the investor focus will likely be on Arexvy, the first RSV vaccine approved for use in older adults. The FDA approval was received in May 2023. The vaccine also received approval in the European Union for use in older adults last month. The commercial launch of this vaccine is expected in the upcoming fall season.
In the past 60 days, estimates for Alkermes’ 2023 earnings per share have risen from 43 cents to $1.27. During the same period, earnings per share estimates for 2024 have risen from $1.78 to $2.08. Year to date, shares of Alkermes have risen 18.0%.
Earnings of Alkermes beat estimates in three of the last four quarters, witnessing an earnings surprise of 90.83%, on average. In the last reported quarter, Alkermes’ earnings beat estimates by 133.33%.
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GSK Beats on Q2 Earnings & Sales, Raises 2023 Guidance
GSK plc (GSK - Free Report) reported second-quarter 2023 adjusted earnings of 97 cents per American depositary share (“ADS”), beating the Zacks Consensus Estimate of 85 cents. Adjusted earnings rose 12% year over year on a reported basis and 16% at a constant exchange rate (CER).
Quarterly revenues rose 4% on a reported basis and on a CER basis to $8.97 billion (£7.18 billion), beating the Zacks Consensus Estimate of $8.49 billion. This upside can be attributed to the rising HIV and Vaccine sales, which partially offset the declining COVID-19 product sales.
GSK reports financial figures under three segments — Specialty Medicines, Vaccines and General Medicines.
Segment Discussion
Sales in the Specialty Medicines segment fell 7% at CER, due to the declining Xevudy sales. Excluding Xevudy sales, revenues from the Specialty Medicines segment were up 12% at CER. Sales growth of HIV and respiratory drugs was also strong.
GSK did not record any Xevudy sales during the second quarter compared with £31 million in first-quarter 2023. GSK markets Xevudy in collaboration with Vir Biotechnology (VIR - Free Report) . Last year, the FDA withdrew the emergency use authorization (EUA) granted to GSK/Vir Biotechnology’s Xevudy. The withdrawal decision for the Vir Biotechnology-partnered antibody therapy was based on data that showed that it was unlikely for the Xevudy dose to be effective against the Omicron variant.
HIV sales increased 12% at CER, driven by sales growth of new HIV drugs — Juluca, Dovato, Cabenuva, Rukobia and Apretude. GSK markets Juluca in collaboration with J&J (JNJ - Free Report) .
GSK generates the majority of its HIV sales from its dolutegravir franchise, comprising three-drug regimens — Triumeq and Tivicay — and two-drug regimens — Dovato and J&J-partnered Juluca. The launch of the two-drug regimens has been eroding sales and market share of the three-drug regimens following their launch. During the second quarter, GSK and J&J’s Juluca and Dovato contributed almost 38% to total HIV sales.
While sales of the dolutegravir franchise were up 5% at CER in the U.S. market, they were flat in Europe. In International markets, sales were up 6% at CER.
Sales of Triumeq declined 16% at CER, while Tivicay sales remained flat.
Sales of the immuno-inflammation drug, Benlysta, were up 19% in the quarter, reflecting growth across all regions.
Sales of the respiratory drug, Nucala, were up 15% at CER during the quarter, driven by growth in ex-U.S. markets.
Oncology sales were down 3% year over year. This downside was due to lower Blenrep sales that fell 73% during the quarter following thedrug’s withdrawal from the U.S. market last November.
Sales of Zejula fell 2% at CER in the quarter. The recently-launched Jemperli added £25 million to the top line in the second quarter compared to £11 million in first-quarter 2023. The uptick was driven by new patient starts in the United States.
Sales of General Medicines were up 8% at CER during the quarter. Loss of sales from established drugs due to generic competition was more than offset by the strong sales growth of respiratory drugs, Trelegy Ellipta and Seretide/Advair and the post-pandemic recovery of Augmentin and Avodart sales. A few established drugs like Avamys and Anoro Ellipta also demonstrated sales growth.
Trelegy Ellipta sales surged 30% year over year, owing to strong growth in all regions. Sales of Anoro Ellipta were up 19% at CER during the second quarter. Key established drug Advair/Seretide sales rose 26% year over year. Sales on Revlar/Breo Ellipta were down 6% at CER year over year.
Vaccine Sales Rise
GSK’s second-quarter vaccine sales increased 18% at CER, driven by geographical expansion and market growth for Shingrix vaccine. GSK also recorded sales of £41 million from COVID-19 booster vaccine co-developed in partnership with Sanofi, all of which were generated from outside the United States.
Shingrix sales rose 20% at CER during the quarter due to geographic expansions and increased demand in ex-U.S. markets.
In Meningitis vaccines, Bexsero sales were up 18%, while sales of Menveo fell 4%. Sales of the influenza vaccine, Fluarix, were down 28% at CER. Sales of Established vaccines were up 13% year over year.
Operating Expenses
Adjusted selling, general and administration (SG&A) costs increased 11% year over year at CER to £2.19 billion. The upside in SG&A costs was due to launch of products in the Specialty Medicines and Vaccines segments.
Research and development (R&D) expenses rose 13% year over year at CER to £1.32 billion due to continued investment by management for pipeline advancement.
Raises 2023 Guidance
GSK raised its guidance for 2023. The company now expects sales to increase 8-10% in 2023 compared with the previously-issued guidance of 6-8%. The uptick in guidance can be attributed to strong growth momentum observed in sales in the HIV portfolio and General Medicines segment in first-half 2023.
Management expects sales of specialty medicines to increase high single-digit percentage at CER in 2023 (previously mid-to-high single digit growth was anticipated), while vaccine sales are still expected to grow in the mid-teens percentage at CER. Management expects single-digit percent growth in the General Medicines segment’s turnover, which was previously expected to remain broadly flat or fall slightly.
GSK expects adjusted operating profit growth to increase between 11% to 13% at CER (previously: 10% to 12%). The company also raised the guidance for its adjusted EPS, which is anticipated to grow in the range of 14-17%, a two-percentage point rise from the previously-issued guidance of 12-15%.
The above guidance excludes any revenues from its COVID-related products. GSK does not expect significant COVID-19 related sales in 2023. If management were to add COVID sales, it expects a reduction of approximately 8% in turnover growth and a decline in adjusted operating profit growth by 4-5%.
Shares were up in pre-market trading on Jul 26 likely due to the uptick in the financial guidance for 2023. In the year so far, the stock has gained 1.6% against the industry’s 11.3% fall.
Image Source: Zacks Investment Research
Though GSK expects continued growth in turnover in second-half 2023, it expects lower growth in HIV and General Medicine sales in second-half 2023 when compared to the year-ago period. Management also expects the adjusted operating profit growth in second-half 2023 to be higher than the first half.
Our Take
GSK’s Q2 results beat were better than expected as it beat estimates on both counts. In addition, the company also raised its financial outlook for 2023, which was expected following a strong performance reported during first-half 2023. Excluding COVID-19 products, sales rose across all segments especially in the HIV portfolio and for Shingrix. The results are likely to reinvigorate investor confidence in company’s pharmaceutical business following the spin-off of its Consumer Business into Haleon.
During the quarter, GSK also completed the acquisition of Bellus Health and strengthened its respiratory pipeline with the addition of camlipixant, a late-stage candidate being evaluated in adults with refractory chronic cough.
In the upcoming quarters, the investor focus will likely be on Arexvy, the first RSV vaccine approved for use in older adults. The FDA approval was received in May 2023. The vaccine also received approval in the European Union for use in older adults last month. The commercial launch of this vaccine is expected in the upcoming fall season.
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Zacks Rank & A Key Pick
GSK currently has a Zacks Rank #2 (Buy). Another top-ranked stock in the biotech sector is Alkermes (ALKS - Free Report) , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, estimates for Alkermes’ 2023 earnings per share have risen from 43 cents to $1.27. During the same period, earnings per share estimates for 2024 have risen from $1.78 to $2.08. Year to date, shares of Alkermes have risen 18.0%.
Earnings of Alkermes beat estimates in three of the last four quarters, witnessing an earnings surprise of 90.83%, on average. In the last reported quarter, Alkermes’ earnings beat estimates by 133.33%.