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GSK Beats on Q3 Earnings and Sales, Raises 2023 Guidance
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GSK plc (GSK - Free Report) reported adjusted earnings of $1.26 per American depositary share (“ADS”) in third-quarter 2023, beating the Zacks Consensus Estimate of $1.09. Adjusted earnings rose 7% year over year on a reported basis and 17% at a constant exchange rate (CER).
Quarterly revenues rose 4% on a reported basis and 10% on a CER basis to $10.3 billion (£8.1 billion), beating the Zacks Consensus Estimate of $9.7 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.
In the year so far, shares of GSK gained 1.6% against the industry’s 24.6% fall.
Image Source: Zacks Investment Research
Segment Discussion
Sales in the Specialty Medicines segment fell 1% at CER due to the declining Xevudy sales. Excluding Xevudy sales, revenues from the Specialty Medicines segment were up 17% at CER. Sales growth of HIV and respiratory drugs was also strong.
GSK did not record any Xevudy sales during the third quarter, in line with second-quarter 2023 levels. 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 15% 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 third quarter, GSK and J&J’s Juluca and Dovato contributed almost 40% 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 47% at CER.
Sales of Triumeq declined 16% at CER, while Tivicay sales rose 7%.
Sales of the immuno-inflammation drug Benlysta were up 20% in the quarter, reflecting growth across all regions.
Sales of the respiratory drug Nucala were up 19% at CER during the quarter, driven by growth across all regions, especially in the U.S. market.
Oncology sales were up 26% year over year, driven by strong growth in Jemperli and Zejula sales. The growth was partially offset by Blenrep sales, which fell 69% during the quarter following thedrug’s withdrawal from the U.S. market last November.
Sales of Zejula rose 22% at CER in the quarter. Jemperli added £45 million to the top line in the third quarter compared to £25 million in second-quarter 2023. The uptick was driven by new patient starts in the United States.
The recently launched blood cancer drug Ojjaara, generated £4 million in product sales in the first quarter of its commercial launch. The FDA approved the drug in September for treating myelofibrosis patients with anaemia.
Sales of General Medicines were down 2% at CER during the quarter. This downside was due to the impact of Returns and Rebates (“RAR”) adjustments in the US market, partially offset by solid sales growth of respiratory drugs, Anoro Ellipta and Trelegy Ellipta, and the post-pandemic recovery of Augmentin and Avodart sales.
Trelegy Ellipta sales surged 23% year over year, owing to strong growth in all regions. Sales of Anoro Ellipta were up 15% at CER during the third quarter. Key established drug Advair/Seretide sales were down 14% year over year. Sales on Revlar/Breo Ellipta were down 18% at CER year over year.
Vaccine Sales Rise
GSK’s third-quarter vaccine sales increased 33% at CER, driven by the successful launch of the RSV vaccine Arexvy in the United States and strong uptake for the Shingrix vaccine in ex-U.S. markets. GSK also recorded sales of £1 million from the COVID-19 booster vaccine co-developed in partnership with Sanofi, all of which were generated from outside the United States.
The first approved RSV vaccine for older adults, Arexvy, was commercially launched in Q3 and generated £709 million in sales, driven by strong demand and initial channel inventory build.Per management, Arexvy achieved two-thirds of the share of retail vaccinations in the quarter.
Shingrix sales rose 15% at CER during the quarter, driven by strong private uptake and public funding expansion in ex-U.S. markets.
In Meningitis vaccines, Bexsero sales were flat, while sales of Menveo rose 10%. Sales of the influenza vaccine, Fluarix, were down 4% at CER. Sales of Established vaccines were up 3% year over year.
Operating Expenses
Adjusted selling, general and administration (SG&A) costs increased 17% year over year at CER to £2.19 billion. The upside in SG&A costs was due to the launch of products in the Specialty Medicines and Vaccines segments.
Research and development (R&D) expenses rose 14% year over year at CER to £1.43 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 12-13% in 2023 compared with the previously issued guidance of 8-10%. The uptick can be attributed to the strong growth momentum observed across all business segments, fueled by the launch of Arexvy in Q3. GSK expects Arexvy sales for the full year 2023 to be between £0.9 to £1.0 billion.
Management expects vaccine sales to increase around 20% at CER in 2023 (previously mid-teens percentage growth was anticipated), while sales of specialty medicines are now expected to increase in low double-digit percent at CER (previously high single-digit percentage). Management also expects low to mid-single-digit percent growth in the General Medicines segment’s turnover, which was previously expected to grow at a low single-digit percentage.
GSK expects adjusted operating profit growth to increase between 13% to 15% at CER (previously: 11% to 13%). The company also raised the guidance for its adjusted EPS, which is anticipated to grow in the range of 17-20%, a three-percentage point rise from the previously issued guidance of 14-17%.
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%.
Our Take
GSK’s Q3 results were better than expected, as it beat estimates on both counts. This is the second time that GSK has raised its financial outlook this year, following the strong commercial launch for Arexvy in the United States. The company’s oncology portfolio, which has been facing a steep decline due to lower Blenrep sales in recent quarters, has started showing recovery on the back of rising Jemperli sales and newly launched Ojjaara.
These results are likely to reinvigorate investor confidence in the company’s pharmaceutical business following the spin-off of its consumer business into Haleon.
In the past 30 days, estimates for Ligand Pharmaceuticals’ 2023 earnings per share have increased from $5.09 to $5.10. During the same period, earnings estimates for 2024 rose from $4.56 to $4.59. Shares of Ligand lost 21.7% in the year-to-date period.
Ligand beat earnings estimates in three of the last four quarters while missing the mark on one occasion. The company has delivered an earnings surprise of 52.47% on average. In the last reported quarter, Ligand’s earnings beat estimates by 86.84%.
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GSK Beats on Q3 Earnings and Sales, Raises 2023 Guidance
GSK plc (GSK - Free Report) reported adjusted earnings of $1.26 per American depositary share (“ADS”) in third-quarter 2023, beating the Zacks Consensus Estimate of $1.09. Adjusted earnings rose 7% year over year on a reported basis and 17% at a constant exchange rate (CER).
Quarterly revenues rose 4% on a reported basis and 10% on a CER basis to $10.3 billion (£8.1 billion), beating the Zacks Consensus Estimate of $9.7 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.
In the year so far, shares of GSK gained 1.6% against the industry’s 24.6% fall.
Image Source: Zacks Investment Research
Segment Discussion
Sales in the Specialty Medicines segment fell 1% at CER due to the declining Xevudy sales. Excluding Xevudy sales, revenues from the Specialty Medicines segment were up 17% at CER. Sales growth of HIV and respiratory drugs was also strong.
GSK did not record any Xevudy sales during the third quarter, in line with second-quarter 2023 levels. 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 15% 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 third quarter, GSK and J&J’s Juluca and Dovato contributed almost 40% 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 47% at CER.
Sales of Triumeq declined 16% at CER, while Tivicay sales rose 7%.
Sales of the immuno-inflammation drug Benlysta were up 20% in the quarter, reflecting growth across all regions.
Sales of the respiratory drug Nucala were up 19% at CER during the quarter, driven by growth across all regions, especially in the U.S. market.
Oncology sales were up 26% year over year, driven by strong growth in Jemperli and Zejula sales. The growth was partially offset by Blenrep sales, which fell 69% during the quarter following thedrug’s withdrawal from the U.S. market last November.
Sales of Zejula rose 22% at CER in the quarter. Jemperli added £45 million to the top line in the third quarter compared to £25 million in second-quarter 2023. The uptick was driven by new patient starts in the United States.
The recently launched blood cancer drug Ojjaara, generated £4 million in product sales in the first quarter of its commercial launch. The FDA approved the drug in September for treating myelofibrosis patients with anaemia.
Sales of General Medicines were down 2% at CER during the quarter. This downside was due to the impact of Returns and Rebates (“RAR”) adjustments in the US market, partially offset by solid sales growth of respiratory drugs, Anoro Ellipta and Trelegy Ellipta, and the post-pandemic recovery of Augmentin and Avodart sales.
Trelegy Ellipta sales surged 23% year over year, owing to strong growth in all regions. Sales of Anoro Ellipta were up 15% at CER during the third quarter. Key established drug Advair/Seretide sales were down 14% year over year. Sales on Revlar/Breo Ellipta were down 18% at CER year over year.
Vaccine Sales Rise
GSK’s third-quarter vaccine sales increased 33% at CER, driven by the successful launch of the RSV vaccine Arexvy in the United States and strong uptake for the Shingrix vaccine in ex-U.S. markets. GSK also recorded sales of £1 million from the COVID-19 booster vaccine co-developed in partnership with Sanofi, all of which were generated from outside the United States.
The first approved RSV vaccine for older adults, Arexvy, was commercially launched in Q3 and generated £709 million in sales, driven by strong demand and initial channel inventory build.Per management, Arexvy achieved two-thirds of the share of retail vaccinations in the quarter.
Shingrix sales rose 15% at CER during the quarter, driven by strong private uptake and public funding expansion in ex-U.S. markets.
In Meningitis vaccines, Bexsero sales were flat, while sales of Menveo rose 10%. Sales of the influenza vaccine, Fluarix, were down 4% at CER. Sales of Established vaccines were up 3% year over year.
Operating Expenses
Adjusted selling, general and administration (SG&A) costs increased 17% year over year at CER to £2.19 billion. The upside in SG&A costs was due to the launch of products in the Specialty Medicines and Vaccines segments.
Research and development (R&D) expenses rose 14% year over year at CER to £1.43 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 12-13% in 2023 compared with the previously issued guidance of 8-10%. The uptick can be attributed to the strong growth momentum observed across all business segments, fueled by the launch of Arexvy in Q3. GSK expects Arexvy sales for the full year 2023 to be between £0.9 to £1.0 billion.
Management expects vaccine sales to increase around 20% at CER in 2023 (previously mid-teens percentage growth was anticipated), while sales of specialty medicines are now expected to increase in low double-digit percent at CER (previously high single-digit percentage). Management also expects low to mid-single-digit percent growth in the General Medicines segment’s turnover, which was previously expected to grow at a low single-digit percentage.
GSK expects adjusted operating profit growth to increase between 13% to 15% at CER (previously: 11% to 13%). The company also raised the guidance for its adjusted EPS, which is anticipated to grow in the range of 17-20%, a three-percentage point rise from the previously issued guidance of 14-17%.
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%.
Our Take
GSK’s Q3 results were better than expected, as it beat estimates on both counts. This is the second time that GSK has raised its financial outlook this year, following the strong commercial launch for Arexvy in the United States. The company’s oncology portfolio, which has been facing a steep decline due to lower Blenrep sales in recent quarters, has started showing recovery on the back of rising Jemperli sales and newly launched Ojjaara.
These results are likely to reinvigorate investor confidence in the company’s pharmaceutical business following the spin-off of its consumer business into Haleon.
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Zacks Rank & A Key Pick
GSK currently has a Zacks Rank #3 (Hold). A top-ranked stock in the overall healthcare sector is Ligand Pharmaceuticals (LGND - 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 30 days, estimates for Ligand Pharmaceuticals’ 2023 earnings per share have increased from $5.09 to $5.10. During the same period, earnings estimates for 2024 rose from $4.56 to $4.59. Shares of Ligand lost 21.7% in the year-to-date period.
Ligand beat earnings estimates in three of the last four quarters while missing the mark on one occasion. The company has delivered an earnings surprise of 52.47% on average. In the last reported quarter, Ligand’s earnings beat estimates by 86.84%.