New GSK takes flight with strong quarter, forecast boost

By Natalie Grover

LONDON (Reuters) - Days after carving out its consumer health business, a slimmed down GSK delivered a strong second-quarter performance on Wednesday, boosting its full-year forecast as demand for its blockbuster shingles vaccine rebounded.

After years of underperformance relative to its peers and missing out on the lucrative market for the first set of COVID-19 vaccines, GSK has ushered in a new era of focus on vaccines and prescription drugs, with the wind in its sails.

Having survived a protracted revolt by activist investors Elliott and Bluebell last year, investor faith in so-called New GSK's prospects has been boosted by clinical trial success for a potential blockbuster RSV vaccine, M&A activity, and a share price that has climbed despite weak stock markets.

On Wednesday, GSK said it now expects 2022 sales to rise 6% to 8% and adjusted operating profit to increase by 13% to 15%, excluding any contributions from the company's COVID-19 solutions business.

Previously, the company had forecast full-year sales to grow 5% to 7% and adjusted operating profit to rise 12% to 14%.

The upgrade reflected a strong beat in adjusted quarterly earnings and revenue, compared with a GSK-compiled consensus https://www.gsk.com/en-gb/investors/analyst-consensus/analyst-consensus estimate.

The performance was driven by better than expected sales in specialty care, general medicines and vaccines, Barclays analysts wrote in a note.

Particularly, GSK's shingles vaccine Shingrix generated 731 million pounds, well ahead of the GSK-compiled consensus estimate of 610 million pounds, as healthcare systems started to move beyond governments' prioritisation of COVID vaccination programmes.

"The leaner organization is more nimble than expected," Hargreaves Lansdown analyst Laura Hoy added.

As a result of the spin-off of the consumer health business, Haleon, GSK is getting 7 billion pounds of financial firepower, which it will tap to further invest in M&A, GSK CEO Emma Walmsley said.

INFLATION

In a post-earnings conference call, Walmsley said GSK is somewhat insulated from the impact of rising inflation given its main vaccines division is protected by multiple supply chain options and benefits from forward-buying.

GSK is part of an industry that falls in the 'essentials' category, she said, "that doesn't mean we're immune from it."

Although people in this country and beyond are living with the reality of rising inflation, she said, "make no mistake, medicines are not contributing to that."

All the growth GSK has reported this year has been demand driven, she added.

However, the company's "pandemic solutions" sales have taken a hit and GSK said that expected 2022 sales had largely been achieved in the first half of this year.

GSK's Xevudy has fallen out of favour in the arsenal of COVID therapies, due to concerns around the limited benefit it provides against Omicron offshoot variants.

Second-quarter Xevudy sales fell to 466 million pounds, after 1.3 billion pounds in the first quarter, though beating analyst expectations in the region of 97 million pounds.

HALEON

Haleon made its debut on the London Stock Exchange earlier this month as the world's biggest standalone consumer health business - home to brands such as Sensodyne toothpaste and Advil painkillers.

GSK has previously predicted that Haleon is poised to generate above market annual organic revenue growth of 4% to 6% in the next three to five years.

On Wednesday, Haleon reiterated this forecast, and said the company expects organic revenue growth to be in the region of 6% to 8% for 2022.

H1 revenue increased by 13.4%, boosted by a rebounding cold and flu season, Haleon said, adding that full results for the first half of 2022 will be published in September.

(Reporting by Natalie Grover in London, Editing by Louise Heavens, Elaine Hardcastle)