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Why Is Glaxo (GSK) Up 5.3% Since Last Earnings Report?
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It has been about a month since the last earnings report for GSK (GSK - Free Report) . Shares have added about 5.3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Glaxo due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Beats on Q3 Earnings & Sales, Raises 2023 Guidance
GSK reported adjusted earnings of $1.26 per American depositary share (“ADS”) for 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) driven by higher profits, lower finance costs and a benefit from lower non-controlling interests.
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. The sales increase was driven by rising HIV and Vaccine sales, which made up for no COVID-19 solutions sales.
Excluding sales from COVID products, total sales were up 16% at CER.
Sales in the United States rose 19%. Sales in Europe rose 5% while that in International markets declined 2% at CER.
All growth rates mentioned below are on a year-on-year basis and at CER.
Quarterly Highlights
GSK reports under three segments: Specialty Medicines, Vaccines and General Medicines. Specialty Medicines, Vaccines and General Medicines are clubbed as commercial operations.
Specialty Medicines
Sales in the Specialty Medicines segment fell 1% at CER due to no sales of Xevudy in the quarter. Excluding Xevudy sales, revenues from the Specialty Medicines segment were up 17% at CER. Sales grew in HIV, Immunology/Respiratory as well as Oncology segments.
HIV sales increased 15% at CER, driven by higher market share, favorable pricing and tender phasing in international business. The higher market share was driven by strong demand for oral two-drug regimens, Dovato and Juluca, and long-acting regimens like Cabenuva and Apretude
Overall, sales of the oral two-drug regimens and long-acting regimens comprised 53% of the total HIV portfolio in the third quarter compared with 42% in the third quarter of 2022, driven by market share growth.
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 Juluca. The launch of the two-drug regimens has been eroding sales and market share of the three-drug regimens following their launch.
Sales from its dolutegravir franchise rose 8% in the quarter. 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%.
Juluca was up 12% while Dovato was up 32% in the third quarter.
Long-acting medicines, Cabenuva and Apretude, contributed £182 million and £37 million, respectively to revenues compared with £176 million and £36 million, respectively in the previous quarter. The growth comes mainly from patient switches from competitor products. Rukobia sales were £30 million in the quarter.
In 2023, HIV sales are expected to grow around 10%.
Oncology sales were up 26% year over year, driven by strong growth in Jemperli and Zejula sales. Blenrep sales declined 69% during the quarter following the drug’s withdrawal from the U.S. market last November.
Sales of Zejula rose 22% at CER in the quarter, driven by strong growth in the U.S. market due to the stocking of the new tablet formulation as well as positive momentum in ex-U.S. markets. Jemperli added £45 million to the top line in the third quarter compared with £25 million in second-quarter 2023. The uptick was driven by new patient starts in the United States. Jemperli was approved for frontline treatment in combination with chemotherapy for patients with dMMR/MSI-H primary advanced or recurrent endometrial cancer in the United States in the third quarter.
New 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 anemia.
Respiratory/Immunology and Other sales were up 18% in the third quarter. Sales of the respiratory drug, Nucala, were up 19% at CER during the quarter, driven by strong demand trends and approvals/launch of additional indications globally. Sales of the immuno-inflammation drug, Benlysta, were up 20% in the quarter, reflecting strong underlying demand in the United States and Europe and higher volumes in Japan and China.
GSK did not record any Xevudy sales during the third quarter.
Management expects sales of Specialty Medicines to increase at a low double-digit percentage compared to a high single-digit percentage at CER in 2023.
General Medicines
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 U.S. market and generic competition to older products, partially offset by solid sales growth of Trelegy Ellipta
In General Medicines, Respiratory sales declined 3% at CER, while Other General Medicines sales were flat.
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.
In General Medicines, GSK expects sales to increase at a low to mid-single-digit percentage compared to its previous expectation of a low single-digit percentage in 2023.
Vaccines
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 the strong uptake of the Shingrix vaccine in ex-U.S. markets. GSK also recorded sales of £1 million from its share of contracted European volumes of COVID-19 booster vaccine, co-developed in partnership with Sanofi. Sales rose 34%, excluding COVID-19 solutions.
Arexvy was commercially launched in the third quarter and generated £709 million in sales, driven by strong demand and initial channel inventory build. Almost all sales were from the United States. 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 the United States, Shingrix sales declined 6% due to an unfavorable wholesaler inventory destocking and lower non-retail demand than the year-ago quarter segment. Retail sales of Shingrix in the U.S. market rose 4% in the quarter. Presently, Shingrix is available across 38 countries. Sales in Europe included deliveries for the UK National Immunisation Programme, which began offering Shingrix vaccination in September.
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.
Management expects vaccine sales to increase around 20% at CER in 2023, up from priori expectation of mid-teens percentage growth.
In 2023, GSK expects Arexvy sales between £0.9 and £1 billion, based on the analog of flu vaccination seasonality. However, it will wait and watch the annual vaccination patterns, duration of protection, competitor dynamics and demand trends following the end of the flu season to understand the outlook for Arexvy sales in 2024.
Profit Discussion
Adjusted operating profit rose 15% at CER to £2.77 billion, driven by strong sales across all segments and higher royalty income, which was partially offset by higher R&D costs and investments behind new product launches and operating profit reduction from lower COVID-19 solutions sales. Adjusted operating profit rose 22%, excluding COVID-19 solutions.
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 late-stage pipeline in Vaccines, Respiratory/Immunology and Infectious Diseases.
Ups 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 the third quarter.
GSK expects adjusted operating profit growth to increase between 13% and 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%.
COVID-related products are expected to hurt sales growth by approximately 8% and adjusted operating profit growth by 4% to 5% in 2023.
SG&A is expected to grow at a rate similar to sales, reflecting investment to support recent and anticipated launches. R&D is expected to increase at a rate lower than sales. The adjusted tax rate is expected to be around 15%-15.5%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
The consensus estimate has shifted -14.48% due to these changes.
VGM Scores
At this time, Glaxo has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Glaxo has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Glaxo is part of the Zacks Medical - Biomedical and Genetics industry. Over the past month, Blueprint Medicines (BPMC - Free Report) , a stock from the same industry, has gained 17.2%. The company reported its results for the quarter ended September 2023 more than a month ago.
Blueprint Medicines reported revenues of $56.57 million in the last reported quarter, representing a year-over-year change of -14.3%. EPS of -$2.20 for the same period compares with -$2.23 a year ago.
For the current quarter, Blueprint Medicines is expected to post a loss of $2.02 per share, indicating a change of +23.8% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.5% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Blueprint Medicines. Also, the stock has a VGM Score of F.
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Why Is Glaxo (GSK) Up 5.3% Since Last Earnings Report?
It has been about a month since the last earnings report for GSK (GSK - Free Report) . Shares have added about 5.3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Glaxo due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Beats on Q3 Earnings & Sales, Raises 2023 Guidance
GSK reported adjusted earnings of $1.26 per American depositary share (“ADS”) for 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) driven by higher profits, lower finance costs and a benefit from lower non-controlling interests.
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. The sales increase was driven by rising HIV and Vaccine sales, which made up for no COVID-19 solutions sales.
Excluding sales from COVID products, total sales were up 16% at CER.
Sales in the United States rose 19%. Sales in Europe rose 5% while that in International markets declined 2% at CER.
All growth rates mentioned below are on a year-on-year basis and at CER.
Quarterly Highlights
GSK reports under three segments: Specialty Medicines, Vaccines and General Medicines. Specialty Medicines, Vaccines and General Medicines are clubbed as commercial operations.
Specialty Medicines
Sales in the Specialty Medicines segment fell 1% at CER due to no sales of Xevudy in the quarter. Excluding Xevudy sales, revenues from the Specialty Medicines segment were up 17% at CER. Sales grew in HIV, Immunology/Respiratory as well as Oncology segments.
HIV sales increased 15% at CER, driven by higher market share, favorable pricing and tender phasing in international business. The higher market share was driven by strong demand for oral two-drug regimens, Dovato and Juluca, and long-acting regimens like Cabenuva and Apretude
Overall, sales of the oral two-drug regimens and long-acting regimens comprised 53% of the total HIV portfolio in the third quarter compared with 42% in the third quarter of 2022, driven by market share growth.
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 Juluca. The launch of the two-drug regimens has been eroding sales and market share of the three-drug regimens following their launch.
Sales from its dolutegravir franchise rose 8% in the quarter. 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%.
Juluca was up 12% while Dovato was up 32% in the third quarter.
Long-acting medicines, Cabenuva and Apretude, contributed £182 million and £37 million, respectively to revenues compared with £176 million and £36 million, respectively in the previous quarter. The growth comes mainly from patient switches from competitor products. Rukobia sales were £30 million in the quarter.
In 2023, HIV sales are expected to grow around 10%.
Oncology sales were up 26% year over year, driven by strong growth in Jemperli and Zejula sales. Blenrep sales declined 69% during the quarter following the drug’s withdrawal from the U.S. market last November.
Sales of Zejula rose 22% at CER in the quarter, driven by strong growth in the U.S. market due to the stocking of the new tablet formulation as well as positive momentum in ex-U.S. markets. Jemperli added £45 million to the top line in the third quarter compared with £25 million in second-quarter 2023. The uptick was driven by new patient starts in the United States. Jemperli was approved for frontline treatment in combination with chemotherapy for patients with dMMR/MSI-H primary advanced or recurrent endometrial cancer in the United States in the third quarter.
New 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 anemia.
Respiratory/Immunology and Other sales were up 18% in the third quarter. Sales of the respiratory drug, Nucala, were up 19% at CER during the quarter, driven by strong demand trends and approvals/launch of additional indications globally. Sales of the immuno-inflammation drug, Benlysta, were up 20% in the quarter, reflecting strong underlying demand in the United States and Europe and higher volumes in Japan and China.
GSK did not record any Xevudy sales during the third quarter.
Management expects sales of Specialty Medicines to increase at a low double-digit percentage compared to a high single-digit percentage at CER in 2023.
General Medicines
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 U.S. market and generic competition to older products, partially offset by solid sales growth of Trelegy Ellipta
In General Medicines, Respiratory sales declined 3% at CER, while Other General Medicines sales were flat.
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.
In General Medicines, GSK expects sales to increase at a low to mid-single-digit percentage compared to its previous expectation of a low single-digit percentage in 2023.
Vaccines
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 the strong uptake of the Shingrix vaccine in ex-U.S. markets. GSK also recorded sales of £1 million from its share of contracted European volumes of COVID-19 booster vaccine, co-developed in partnership with Sanofi. Sales rose 34%, excluding COVID-19 solutions.
Arexvy was commercially launched in the third quarter and generated £709 million in sales, driven by strong demand and initial channel inventory build. Almost all sales were from the United States. 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 the United States, Shingrix sales declined 6% due to an unfavorable wholesaler inventory destocking and lower non-retail demand than the year-ago quarter segment. Retail sales of Shingrix in the U.S. market rose 4% in the quarter. Presently, Shingrix is available across 38 countries. Sales in Europe included deliveries for the UK National Immunisation Programme, which began offering Shingrix vaccination in September.
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.
Management expects vaccine sales to increase around 20% at CER in 2023, up from priori expectation of mid-teens percentage growth.
In 2023, GSK expects Arexvy sales between £0.9 and £1 billion, based on the analog of flu vaccination seasonality. However, it will wait and watch the annual vaccination patterns, duration of protection, competitor dynamics and demand trends following the end of the flu season to understand the outlook for Arexvy sales in 2024.
Profit Discussion
Adjusted operating profit rose 15% at CER to £2.77 billion, driven by strong sales across all segments and higher royalty income, which was partially offset by higher R&D costs and investments behind new product launches and operating profit reduction from lower COVID-19 solutions sales. Adjusted operating profit rose 22%, excluding COVID-19 solutions.
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 late-stage pipeline in Vaccines, Respiratory/Immunology and Infectious
Diseases.
Ups 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 the third quarter.
GSK expects adjusted operating profit growth to increase between 13% and 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%.
COVID-related products are expected to hurt sales growth by approximately 8% and adjusted operating profit growth by 4% to 5% in 2023.
SG&A is expected to grow at a rate similar to sales, reflecting investment to support recent and anticipated launches. R&D is expected to increase at a rate lower than sales. The adjusted tax rate is expected to be around 15%-15.5%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
The consensus estimate has shifted -14.48% due to these changes.
VGM Scores
At this time, Glaxo has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Glaxo has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Glaxo is part of the Zacks Medical - Biomedical and Genetics industry. Over the past month, Blueprint Medicines (BPMC - Free Report) , a stock from the same industry, has gained 17.2%. The company reported its results for the quarter ended September 2023 more than a month ago.
Blueprint Medicines reported revenues of $56.57 million in the last reported quarter, representing a year-over-year change of -14.3%. EPS of -$2.20 for the same period compares with -$2.23 a year ago.
For the current quarter, Blueprint Medicines is expected to post a loss of $2.02 per share, indicating a change of +23.8% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.5% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Blueprint Medicines. Also, the stock has a VGM Score of F.