1st May 2024 10:43
(Alliance News) - GSK PLC's strong first quarter may have addressed any "lingering concerns" about its pipeline and ability to deliver growth, an analyst said on Wednesday.
Shares in GSK were up 1.7% to 1,701.64 pence in London on Wednesday morning.
The London-based pharmaceutical maker said revenue in the first-quarter of the year was up 5.9% to GBP7.36 billion from GBP6.95 billion a year prior.
Pretax profit, however, weakened 29% to GBP1.36 billion from GBP1.91 billion. GSK reported 'other' expenses worth GBP533 million, swung from GBP297 million in gains a year prior and hurting its bottom line. Cost of sales rose 1.5% to GBP1.97 billion from GBP1.94 billion.
Earnings per share were 43.1p compared to 36.8p a year ago.
GSK reported "business momentum" across all product areas, particularly in Vaccines and Specialty Medicines, including sales contributions from newly launched vaccines and medicines Arexvy and Ojjaara respectively. General Medicines, particularly Trelegy, also performed better than expected, it said.
Vaccines sales rose 22% at constant current to GBP2.28 billion with sales of shingles drug Shingrix up 18% to GBP945 million. Sales of respiratory syncytial virus treatment Arexvy were GBP182 million.
Specialty Medicines sales rose 17% at constant current to GBP2.52 billion, with sales of HIV drugs up 14% at GBP1.61 billion.
General Medicines sales edged up by 1% to GBP2.56 billion. Here, sales of Trelegy, a medicine used to relieve the symptoms of moderate to severe chronic obstructive pulmonary disease, rose 33% at constant currency to GBP591 million.
For 2024, GSK expects turnover growth, at constant currency, towards the upper part of 5% to 7% range; core operating profit growth of 9% to 11%, up from 7% to 10% before; and core EPS growth of 8% to 10%, up from 6% to 9% before.
Chief Executive Officer Emma Walmsley said: "We have made a strong start to 2024, with another quarter of excellent performance and continued pipeline progress, including positive data read outs for 4 phase III medicines.
Shore Capital analyst Sean Conroy noted GSK sales beat consensus expectations for another consecutive quarter, with revenue 4% ahead, and adjusted EPS 16% ahead of expectations.
Conroy said Vaccines sales were 5% ahead of forecast, although GSK's recently launched RSV vaccine, Arexvy, came in 5% below expectations.
Shingrix sales beat forecasts by 4%. Conroy noted sales growth "tempered" in the US, as expected, but this has been offset by strong uptake ex-US which accounts for around 50% of sales. He pointed out shipments to Zhifei in China began earlier than expected.
HIV sales were 3% ahead of consensus and General Medicines 7% ahead. The latter was helped by a strong performance from Trelegy along with the rest of the respiratory portfolio, Conroy said.
The Shore Capital analyst pointed out that market expectations for full-year sales growth are already at the top-end of the guided range of 5% to 7%. Therefore, he expects little change to forecasts.
Shore has a 'buy' rating on GSK.
"We sense that any lingering concerns that might have remained around GSK's pipeline and its ability to deliver growth have continued to abate," Conroy remarked.
"Zantac litigation continues to weigh on sentiment, and we still believe a worst-case, up to USD30 billion scenario for litigation is being reflected in the share price and the improving growth outlook is still being overlooked," he added.
Zantac was a heartburn drug that was pulled off the market in 2020 at the request of the US Food & Drug Administration, after low levels of a "probable carcinogen" were found in samples.
The carcinogen, known as NDMA, is not harmful in very small amounts. However, tests showed that there were excessive quantities of NDMA in ranitidine, otherwise known as Zantac.
Multiple litigations have followed. Throughout, GSK has maintained that it does not admit "any liability". It has settled several cases before trial.
In February, GSK said it "will continue to vigorously defend itself based on the facts and the science in all other Zantac cases".
Derren Nathan, head of equity research, Hargreaves Lansdown was also positive on Wedneday update from the company.
"GSK has started 2024 in rude health," he said, noting strong growth in vaccine and speciality medicines drove a double digit rise in group sales.
He said this is pleasing to see, given the clinical success emerging from the pipeline.
"With four positive phase III read outs so far this year the odds of further approvals are on the increase. And in the vaccines space applications for additional authorisations for RSV jab Arexvy and shingles injection Shingrix could help accelerate the uptake of two important products," he added.
Nathan noted GSK's valuation lags its peer group, with the Zantac litigations continuing to cast a shadow.
While GSK won't put a number on the potential liability, Nathan noted external estimates suggest the potential downside is "more than priced in".
While it could be a while before more clarity emerges on Zantac, it's hard to "fault ongoing financial and clinical progress", the Hargreaves Lansdown analyst commented.
By Jeremy Cutler, Alliance News reporter
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