31st Jul 2024 10:08
(Alliance News) - Drugmaker GSK PLC raised its annual outlook on the back of second-quarter revenue growth, but its Vaccines offering struggled, taking some shine out of its earnings.
The firm now expects revenue will rise between 7% and 9% at constant currency for 2024, its view increased from its previous 5% to 7% range. GSK had expected growth "towards the upper part" of that range.
Constant currency core operating profit growth of 11% to 13% is expected, as GSK raised its outlook from 9% and 11%.
Its guidance does not factor in its Covid-19 Solutions offering, as it does not anticipate further "pandemic-related sales or operating profit" this year.
For the second-quarter of 2024, the London-based pharmaceuticals firm said revenue rose 9.8% to GBP7.88 billion from GBP7.18 billion a year prior. Pretax profit, however, fell by a quarter year-on-year to GBP1.50 billion from GBP1.99 billion.
Core operating profit, which excludes items such as legal, restructuring and impairment costs from the equation, increased 16% to GBP2.51 billion from GBP2.17 billion.
Half-year revenue rose 7.9% on-year to GBP15.25 billion, while pretax profit was down 27% at GBP2.85 billion. Half-year core operating profit increased 16% to GBP4.96 billion, however.
GSK said the first-half performance reflected excellent business momentum, including increased sales growth of Specialty Medicines, particularly reflecting successful new launches in Oncology and for long-acting HIV medicines.
General Medicines, including Trelegy, also continued to perform better than expected. Sales are now expected to grow between 7% to 9% at constant exchange rates, compared with prior guidance of the "upper part of the range of between 5% to 7% increase".
Improved sales performances in Specialty and General Medicines are expected to more than offset lower sales growth of Vaccines this year, which reflects revised recommendations for RSV vaccinations issued in June by the US Advisory Committee on Immunization Practices.
GSK lowered guidance for its Vaccines division for revenue to increase by "low to mid-single digit per cent" from prior guidance for a "high single-digit to low double-digit" per cent increase.
The Vaccines division also reported "waning" demand for shingles drug, Shingrix, where sales fell 4% during the quarter.
GSK said "channel inventory reductions, changes in retail vaccine prioritisation and lower demand in the US more than offset growth in International and Europe" hit sales.
Shore Capital Markets said that at GBP832 million, down 4% at constant currency, Shingrix sales "missed materially" in the second-quarter, 20% shy of consensus. In the US alone, sales slumped 36% at constant currency, Shore added.
Nonetheless, it still has a 'buy' on GSK shares, believing the stock trades at an unjustified discount to pharma peers.
"We still view the current discount to peers as unwarranted and largely attributable to misguided assumptions around the potential cost of Zantac litigation. Our thesis remains that GSK offers a decent period of near-term growth with a realistic prospect of fulfilling its longer-term ambitions, which taken together look wholly unbecoming of the earnings multiple it currently trades on," the broker said.
Citi analyst Peter Verdult noted the Vaccines arm received a blow in June, after a US Advisory Committee on Immunization Practices meeting.
ACIP did not recommend the GSK's respiratory syncytial virus jab, Arexvy, for adults aged under 60.
"We anticipate investor focus to fall on the lowered expectations for the vaccines division as a result of uncertainty around the target Arexvy patient population in the US following the June ACIP meeting and slowing US Shingrix momentum," the Citi analysts said.
Citi also rates GSK at 'buy'.
Shares in the company traded 1.3% lower at 1,523.00 pence each in London on Wednesday morning.
By Eric Cunha, Alliance News news editor
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