Yahoo Finance Glaxo (GSK) Up 1.6% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for GSK (GSK). Shares have added about 1.6% 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 drivers.
Beats Q1 Earnings & Sales Estimates, Ups 2024 Guidance
GSK reported core earnings of $1.09 per American depositary share (“ADS”) for first-quarter 2024, beating the Zacks Consensus Estimate of 94 cents. Core earnings rose 16% year over year on a reported basis and 28% at a constant exchange rate (CER) driven by higher profits and lower finance costs, partly offset by higher non-controlling interest and a higher tax rate.
Quarterly revenues increased 6% on a reported basis and 10% at CER to $9.34 billion (£7.36 billion), which beat the Zacks Consensus Estimate of $8.98 billion.
Excluding sales from COVID products, total sales were up 13% at CER gaining from newly launched products Arexvy, Ojjaara and Jemperli.
Sales in the United States rose 14%. Sales in Europe declined 3% while that in International markets rose 16% 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 17%. Excluding Xevudy sales, revenues in the Specialty Medicines segment were up 19%.
Sales grew in HIV, Immunology/Respiratory as well as Oncology segments.
HIV sales rose 14%, driven by strong demand and increased market share for oral two-drug regimens, Dovato and Juluca, and long-acting regimens like Cabenuva and Apretude.
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 6% in the quarter. While sales of the dolutegravir franchise were up 5% in the U.S. market, they rose 3% in Europe. In International markets, sales were up 14%.
Sales of Triumeq declined 14%, while Tivicay sales rose 4% during the quarter. Juluca rose 8% while Dovato was up 27% in the quarter. Rukobia sales rose 36% in the quarter. New long-acting medicines, Cabenuva and Apretude, contributed £213 million and £54 million, respectively, to revenues compared with £223 million and £52 million, respectively, in the previous quarter. The growth of these products comes from strong patient demand.
HIV sales are projected to grow in the high single digits to low double digits in 2024.
Oncology sales more than doubled during the quarter, driven by the strong U.S. launch of Ojjaara and encouraging patient growth in Jemperli and Zejula sales. The upside was partially offset by Blenrep sales, which did not generate any sales during the quarter following the drug’s withdrawal from the U.S. market in 2022.
Sales of Zejula rose 27% at CER in the quarter, driven by increased patient demand and higher volumes due to the new tablet formulation as well as new launches in international markets. Jemperli added £80 million to the top line in the first quarter compared with £60 million in fourth-quarter 2023. Ojjaara generated £52 million in product sales during the quarter compared with £29 million in fourth-quarter 2023. The FDA approved the drug in September for treating myelofibrosis patients with anemia, while the drug was approved in the EU in January 2024. GSK has launched the drug in the United Kingdom and Germany.
Respiratory/Immunology and Other sales were up 11% in the first quarter. Sales of the respiratory drug Nucala were up 13% at CER, driven by growing demand in European and International markets, which was partially offset by flattish growth in the United States. Sales of the immuno-inflammation drug, Benlysta, were up 8% in the quarter driven by strong demand and volume growth in European and International markets.
Xevudy generated sales of £1 million in the first quarter compared with £13 million in fourth-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 1% during the quarter. This upside was driven by solid sales growth of asthma inhaler Trelegy Ellipta across all regions and the increased demand for antibiotics in the International market. The upside was offset by a decline across the Established Respiratory portfolio following the adverse impact of removing the Average Manufacturer Price (AMP) cap on Medicaid drug prices in the United States.
In General Medicines, Respiratory sales rose 2% at CER, while Other General Medicines sales declined 2%.
Trelegy Ellipta sales surged 33% during the quarter, owing to strong growth in all regions driven by strong patient demand and increased market share. Sales of Anoro Ellipta rose 3%. Key established drug Advair/Seretide sales were down 13%, while sales of Revlar/Breo Ellipta were up 4%.
In General Medicines, GSK expects sales to decline in a mid-single-digit range in 2024.
Vaccines
GSK’s first-quarter vaccine sales increased by 16%, driven by demand for the RSV vaccine Arexvy in the United States and strong uptake for the Shingrix vaccine in ex-U.S. markets. In the quarter, GSK did not record any sales from the COVID-19 booster vaccine co-developed in partnership with Sanofi.
Arexvy, generated £182 million during the quarter, reflecting strong consumer uptake. Per management, Arexvy maintained around two-thirds of the share of retail vaccinations in the quarter. Though sales fell significantly when compared with fourth-quarter 2023 sales of £529 million, the downside was in line with anticipated seasonality patterns.
In 2024, GSK expects the majority of Arexvy sales to come from the U.S. market. Sales are expected to be weighted to the second half in preparation for the 2024/25 RSV season.
Shingrix sales rose 18% during the quarter, driven by strong public funding expansion in outside U.S. markets and early supply to new partner, Zhifei, in China. Presently, Shingrix is available across 39 countries outside the United States and ex U.S. sales represent more than 50% of global sales.
In the United States, Shingrix sales declined 4% due to a difficult comparison with the year-ago quarter (which benefited from the removal of the co-pay for adults aged 65 and over on Medicare) and the prioritization of other adult viral respiratory season vaccines.
In Meningitis vaccines, Bexsero sales rose 3%, while sales of Menveo rose 41%. Sales of the influenza vaccine, Fluarix, were up 8%. Sales of Established vaccines were up 7% 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 27% at CER to £2.44 billion, driven by strong sales across all segments, favorable product mix and SG&A leverage, partly offset by the impact of the loss of Gardasil royalties.
Adjusted selling, general and administration (SG&A) costs decreased 2% to £1.98 billion driven by improved operational leverage and one-off benefit from the successful Zejula royalty dispute.
Adjusted research and development (R&D) expenses rose 14% to £1.36 billion, driven by continued investment in late-stage pipeline candidates within Vaccines, Respiratory and Infectious Diseases segments.
2024 Guidance
GSK raised its guidance for 2024. Management expects sales growth to be toward the upper end of the previously-announced guidance of 5-7% range (at CER).
Management expects top-line growth to be higher in the first half of 2024 compared to the second half due to a difficult comparison with the latter half of 2023. Sales in the second half of 2023 benefited from newly-launched vaccines and medicines. The majority of Shingrix sales in China are also expected to be in the first half of 2024.
The company expects adjusted operating profit growth to increase between 9% and 11% at CER (previously a 7-10% rise). GSK also raised its core EPS growth guidance from a range of 6-9% to 8-10%, reflecting higher operating profit and more favorable net finance costs. The guidance increase was driven by the expectation of slightly higher royalty income due to a successful Zejula royalty dispute appeal. Royalty income is expected to be slightly higher in the range of £550 to £600 million in 2024
In 2024, GSK does expect to record any 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 the 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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, Glaxo has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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 broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Glaxo has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
GSK PLC Sponsored ADR (GSK) : Free Stock Analysis Report
