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Glaxo (GSK) Up 3.1% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for GSK (GSK - Free Report) . Shares have added about 3.1% 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 its most recent earnings report in order to get a better handle on the important drivers.
GSK reported adjusted earnings of 72 cents per American depositary share (“ADS”) in fourth-quarter 2023, missing the Zacks Consensus Estimate of 76 cents. Adjusted earnings rose 12% year over year on a reported basis and 25% at a constant exchange rate (CER) driven by higher profits, lower finance costs and a benefit from lower non-controlling interests.
Quarterly revenues increased 9% on a reported basis and 15% on a CER basis to $10.1 billion (£8.1 billion), beating the Zacks Consensus Estimate of $9.8 billion.
Excluding sales from COVID products, total sales were up 21% at CER.
While sales rose across all GSK segments, the growth was dominated by Shingrix and RSV vaccine Arexvy. The company’s oncology portfolio, which has been facing a steep decline due to lower Blenrep sales in recent quarters, registered impressive growth on the back of rising Jemperli and Zejula sales and the newly-launched Ojjaara.
Sales in the United States rose 26%. Sales in Europe were flat while that in International markets rose 6% 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 rose 12% at CER. 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 10% at CER, driven by higher market share 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 55% of the total HIV portfolio in the fourth quarter compared with 46% in the fourth 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 2% in the quarter. While sales of the dolutegravir franchise were down 1% at CER in the U.S. market, they rose 4% in Europe. In International markets, sales were up 12% at CER.
Sales of Triumeq declined 13% at CER, while Tivicay sales remained flat during the quarter.
Juluca was down 5% while Dovato was up 21% in the quarter. Rukobia sales rose 42% in the quarter.
Long-acting medicines, Cabenuva and Apretude, contributed £223 million and £52 million, respectively to revenues compared with £182 million and £37 million, respectively in the previous quarter. The growth of these products comes from strong patient demand.
HIV sales are projected to grow in the range of high-single digit to low-double-digits in 2024.
Oncology sales were up 62% year over year, driven by the strong U.S. launch of Ojjaara and encouraging growth in Jemperli and Zejula sales. The upside was partially offset by Blenrep sales, which fell 78% during the quarter following the drug’s withdrawal from the U.S. market in 2022.
Sales of Zejula rose 28% 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 £60 million to the top line in the fourth quarter compared to £45 million in third-quarter 2023. The uptick was driven by new patient starts in the United States.
New blood cancer drug Ojjaara generated £29 million in product sales during the quarter, compared to £4 million in third-quarter 2023. The FDA approved the drug in September for treating myelofibrosis patients with anemia.
Respiratory/Immunology and Other sales were up 25% in the fourth quarter. Sales of the respiratory drug, Nucala, were up 25% at CER during the quarter, driven by strong demand trends, increasing new patient starts coupled with channel inventory build and approvals/launch of additional indications globally. Sales of the immuno-inflammation drug, Benlysta, were up 25% in the quarter, reflecting strong underlying demand in the United States and Europe and higher volumes in Japan and China.
Xevudy generated sales of £13 million in the fourth quarter compared with nil revenues in third-quarter 2023.
Management expects sales of Specialty Medicines segment to increase by a low double-digit percentage at CER in 2024.
General Medicines
Sales of General Medicines were up 5% at CER during the quarter. This upside was driven by solid sales growth of respiratory drugs, Anoro Ellipta, Breo Ellipta and Trelegy Ellipta and the continued post-pandemic recovery of the antibiotic market outside the United States.
In General Medicines, Respiratory sales rose 9% at CER, while Other General Medicines sales declined 2%.
Trelegy Ellipta sales surged 35% year over year, owing to strong growth in all regions. Sales of Anoro Ellipta were up 16% at CER during the fourth quarter. Key established drug Advair/Seretide sales were down 12% year over year. Sales on Revlar/Breo Ellipta were up 27% at CER year over year.
In General Medicines, GSK expects sales to decline in a mid-single-digit range in 2024.
Vaccines
GSK’s fourth-quarter vaccine sales increased 29% 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 £7 million from its share of contracted European volumes of COVID-19 booster vaccine, co-developed in partnership with Sanofi. Sales rose 33%, excluding COVID-19 solutions.
Arexvy was commercially launched in the third quarter and generated £529 million during the quarter, compared to £709 million in third-quarter 2023 sales, driven by strong demand. Almost all sales were from the United States. Per management, Arexvy achieved two-thirds of the share of retail vaccinations in the quarter. In full year 2023, Arexvy achieved more than £1.2 billion in sales driven by strong uptake and leading market share.
Shingrix sales rose 23% 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 rose 6% due to easy comparison to the year-ago quarter which included planned wholesaler inventory reductions. Presently, Shingrix is available across 39 countries outside the United States. Sales in Europe included deliveries for the UK National Immunisation Programme, which began offering Shingrix vaccination in September.
In Meningitis vaccines, Bexsero sales rose 21%, while sales of Menveo rose 19%. Sales of the influenza vaccine, Fluarix, were down 64% at CER. Sales of Established vaccines were up 8% year over year.
Vaccine sales are expected to grow in high single-digit to low double-digit percentage at CER in 2024.
Profit Discussion
Adjusted operating profit rose 21% at CER to £1.75 billion, driven by strong sales across all segments, favourable product mix and higher royalty income, which was partially offset by higher R&D costs and investments behind new product launches.
Adjusted selling, general and administration (SG&A) costs increased 12% year over year at CER to £2.59 billion. The upside in SG&A costs was due to the launch of new products in the Specialty Medicines and Vaccines segments.
Research and development (R&D) expenses rose 20% year over year at CER to £1.78 billion due to continued investment by management for late-stage pipeline in Vaccines, Respiratory/Immunology and Infectious Diseases.
2024 Guidance
GSK issued its guidance for 2024. The company expects sales to increase 5% to 7% at CER in 2024.
The company expects adjusted operating profit growth to increase between 7% to 10% at CER. GSK also guided its adjusted EPS, which is anticipated to grow in the range of 6-9%. The 2024 guidance excludes the impact of COVID-19 solutions.
In 2024, GSK does expect to record any further COVID-19 pandemic-related sales or operating profit. This is expected to reduce GSK’s sales growth by 1%, and operating profit growth by 2% in 2024.
Currency is expected to hurt 2024 revenues by 3% and adjusted operating profit by 5%.
SG&A is expected to grow at a low single-digit rate in 2024 which is a step-down from double-digit increase seen in 2023. R&D is expected to increase at a rate similar to sales. The adjusted tax rate is expected to be around 17% which is higher than 14% in 2023.
The company announced a 7% increase in its annual dividend to 60 pence per share.
Ups Long Term Outlook
Based on the rising product sales and future commercial launches, GSK also raised its long-term outlook previously given, for the period 2021-2026 and for 2031. For the period between 2021 and 2026, GSK now expects sales to increase by a CAGR of more than 7% and adjusted operating profit to increase by more than 11%. In 2021, management had guided for more than 5% and more than 10%, respectively. Adjusted operating profit margin in 2026 is now expected to be more than 31%.
By 2031, GSK now expects to achieve sales of more than £38 billion on a risk-adjusted basis and at CER which is £5 billion more than the estimate given in 2021. Of this, GSK expected to reach more than £33 billion in risk-adjusted sales by 2026.
Operating margins are expected to be broadly stable through the 2028-2030 period when its dolutegravir franchise will likely face loss of exclusivity.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 7.74% due to these changes.
VGM Scores
At this time, Glaxo has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Following the exact same course, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Glaxo has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Glaxo (GSK) Up 3.1% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for GSK (GSK - Free Report) . Shares have added about 3.1% 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 its most recent earnings report in order to get a better handle on the important drivers.
Lags Q4 Earnings, Tops Sales, Issues Upbeat 2024 Guidance
GSK reported adjusted earnings of 72 cents per American depositary share (“ADS”) in fourth-quarter 2023, missing the Zacks Consensus Estimate of 76 cents. Adjusted earnings rose 12% year over year on a reported basis and 25% at a constant exchange rate (CER) driven by higher profits, lower finance costs and a benefit from lower non-controlling interests.
Quarterly revenues increased 9% on a reported basis and 15% on a CER basis to $10.1 billion (£8.1 billion), beating the Zacks Consensus Estimate of $9.8 billion.
Excluding sales from COVID products, total sales were up 21% at CER.
While sales rose across all GSK segments, the growth was dominated by Shingrix and RSV vaccine Arexvy. The company’s oncology portfolio, which has been facing a steep decline due to lower Blenrep sales in recent quarters, registered impressive growth on the back of rising Jemperli and Zejula sales and the newly-launched Ojjaara.
Sales in the United States rose 26%. Sales in Europe were flat while that in International markets rose 6% 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 rose 12% at CER. 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 10% at CER, driven by higher market share 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 55% of the total HIV portfolio in the fourth quarter compared with 46% in the fourth 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 2% in the quarter. While sales of the dolutegravir franchise were down 1% at CER in the U.S. market, they rose 4% in Europe. In International markets, sales were up 12% at CER.
Sales of Triumeq declined 13% at CER, while Tivicay sales remained flat during the quarter.
Juluca was down 5% while Dovato was up 21% in the quarter. Rukobia sales rose 42% in the quarter.
Long-acting medicines, Cabenuva and Apretude, contributed £223 million and £52 million, respectively to revenues compared with £182 million and £37 million, respectively in the previous quarter. The growth of these products comes from strong patient demand.
HIV sales are projected to grow in the range of high-single digit to low-double-digits in 2024.
Oncology sales were up 62% year over year, driven by the strong U.S. launch of Ojjaara and encouraging growth in Jemperli and Zejula sales. The upside was partially offset by Blenrep sales, which fell 78% during the quarter following the drug’s withdrawal from the U.S. market in 2022.
Sales of Zejula rose 28% 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 £60 million to the top line in the fourth quarter compared to £45 million in third-quarter 2023. The uptick was driven by new patient starts in the United States.
New blood cancer drug Ojjaara generated £29 million in product sales during the quarter, compared to £4 million in third-quarter 2023. The FDA approved the drug in September for treating myelofibrosis patients with anemia.
Respiratory/Immunology and Other sales were up 25% in the fourth quarter. Sales of the respiratory drug, Nucala, were up 25% at CER during the quarter, driven by strong demand trends, increasing new patient starts coupled with channel inventory build and approvals/launch of additional indications globally. Sales of the immuno-inflammation drug, Benlysta, were up 25% in the quarter, reflecting strong underlying demand in the United States and Europe and higher volumes in Japan and China.
Xevudy generated sales of £13 million in the fourth quarter compared with nil revenues in third-quarter 2023.
Management expects sales of Specialty Medicines segment to increase by a low double-digit percentage at CER in 2024.
General Medicines
Sales of General Medicines were up 5% at CER during the quarter. This upside was driven by solid sales growth of respiratory drugs, Anoro Ellipta, Breo Ellipta and Trelegy Ellipta and the continued post-pandemic recovery of the antibiotic market outside the United States.
In General Medicines, Respiratory sales rose 9% at CER, while Other General Medicines sales declined 2%.
Trelegy Ellipta sales surged 35% year over year, owing to strong growth in all regions. Sales of Anoro Ellipta were up 16% at CER during the fourth quarter. Key established drug Advair/Seretide sales were down 12% year over year. Sales on Revlar/Breo Ellipta were up 27% at CER year over year.
In General Medicines, GSK expects sales to decline in a mid-single-digit range in 2024.
Vaccines
GSK’s fourth-quarter vaccine sales increased 29% 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 £7 million from its share of contracted European volumes of COVID-19 booster vaccine, co-developed in partnership with Sanofi. Sales rose 33%, excluding COVID-19 solutions.
Arexvy was commercially launched in the third quarter and generated £529 million during the quarter, compared to £709 million in third-quarter 2023 sales, driven by strong demand. Almost all sales were from the United States. Per management, Arexvy achieved two-thirds of the share of retail vaccinations in the quarter. In full year 2023, Arexvy achieved more than £1.2 billion in sales driven by strong uptake and leading market share.
Shingrix sales rose 23% 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 rose 6% due to easy comparison to the year-ago quarter which included planned wholesaler inventory reductions. Presently, Shingrix is available across 39 countries outside the United States. Sales in Europe included deliveries for the UK National Immunisation Programme, which began offering Shingrix vaccination in September.
In Meningitis vaccines, Bexsero sales rose 21%, while sales of Menveo rose 19%. Sales of the influenza vaccine, Fluarix, were down 64% at CER. Sales of Established vaccines were up 8% year over year.
Vaccine sales are expected to grow in high single-digit to low double-digit percentage at CER in 2024.
Profit Discussion
Adjusted operating profit rose 21% at CER to £1.75 billion, driven by strong sales across all segments, favourable product mix and higher royalty income, which was partially offset by higher R&D costs and investments behind new product launches.
Adjusted selling, general and administration (SG&A) costs increased 12% year over year at CER to £2.59 billion. The upside in SG&A costs was due to the launch of new products in the Specialty Medicines and Vaccines segments.
Research and development (R&D) expenses rose 20% year over year at CER to £1.78 billion due to continued investment by management for late-stage pipeline in Vaccines, Respiratory/Immunology and Infectious Diseases.
2024 Guidance
GSK issued its guidance for 2024. The company expects sales to increase 5% to 7% at CER in 2024.
The company expects adjusted operating profit growth to increase between 7% to 10% at CER. GSK also guided its adjusted EPS, which is anticipated to grow in the range of 6-9%. The 2024 guidance excludes the impact of COVID-19 solutions.
In 2024, GSK does expect to record any further COVID-19 pandemic-related sales or operating profit. This is expected to reduce GSK’s sales growth by 1%, and operating profit growth by 2% in 2024.
Currency is expected to hurt 2024 revenues by 3% and adjusted operating profit by 5%.
SG&A is expected to grow at a low single-digit rate in 2024 which is a step-down from double-digit increase seen in 2023. R&D is expected to increase at a rate similar to sales. The adjusted tax rate is expected to be around 17% which is higher than 14% in 2023.
The company announced a 7% increase in its annual dividend to 60 pence per share.
Ups Long Term Outlook
Based on the rising product sales and future commercial launches, GSK also raised its long-term outlook previously given, for the period 2021-2026 and for 2031. For the period between 2021 and 2026, GSK now expects sales to increase by a CAGR of more than 7% and adjusted operating profit to increase by more than 11%. In 2021, management had guided for more than 5% and more than 10%, respectively. Adjusted operating profit margin in 2026 is now expected to be more than 31%.
By 2031, GSK now expects to achieve sales of more than £38 billion on a risk-adjusted basis and at CER which is £5 billion more than the estimate given in 2021. Of this, GSK expected to reach more than £33 billion in risk-adjusted sales by 2026.
Operating margins are expected to be broadly stable through the 2028-2030 period when its dolutegravir franchise will likely face loss of exclusivity.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 7.74% due to these changes.
VGM Scores
At this time, Glaxo has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Following the exact same course, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Glaxo has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.