GSK stays strong as healthy sales beat expectations

By Natalie Grover and Maggie Fick

LONDON (Reuters) -GSK began 2023 with a quarterly performance that beat analyst expectations and extended a series of positive results thanks to strong sales of its vaccines as well as HIV and respiratory medicines.

The company reaffirmed its guidance for 2023, saying it expected adjusted operating profit growth to be higher in the second half but lower in the first half of the year when expected drug launches will increase costs.

In recent quarters the British drugmaker, which carved out its consumer health business Haleon last year, has begun to reverse years of underperformance relative to its peers and bounce back after largely missing out on the market for COVID-19 vaccines.

Even after stripping out one-off contributions, underlying revenue and earnings beat expectations by a respectable 3% and 4% respectively, Citi analyst Andrew Baum wrote in a note.

These are solid results for GSK investors, said Lucy Coutts, investment director at wealth management firm JM Finn, which holds GSK shares.

Baum added that there was little material risk to GSK's near-term earnings, though investors are nervous ahead of a trial in California for Zantac, a discontinued heartburn drug that claimants say is linked to cancer.

Some of those fears were quashed in December after a U.S. judge dismissed about 50,000 claims in federal court.

That does not directly affect tens of thousands of similar cases pending in state courts and a trial in July will be the first test of how Zantac cancer claims fare before a jury.

Investors are also concerned about the company's long-term prospects, given the pending loss of patent protection on one of GSK's HIV compounds and setbacks in its marketed oncology portfolio.

To compensate, the company has announced a number of buyout deals, including Bellus Health, Affinivax and Sierra Oncology.

The company intends to continue shopping, CEO Emma Walmsley said in a post-earnings call.

GSK is also relying in part on its potential blockbuster vaccine for RSV, which leads to thousands of hospitalisations and deaths each year.

It expects to launch the vaccine this year in the U.S. and Europe, pending regulatory approval, as does rival Pfizer with its own RSV vaccine.

($1 = 0.8039 pounds)

(Reporting by Maggie Fick and Natalie Grover in LondonEditing by Louise Heavens, Barbara Lewis and David Goodman)