Yahoo Finance GSK's Q3 Earnings Beat, Ups 2022 Sales Outlook, Stock Up
GSK plc GSK reported third-quarter 2022 adjusted earnings of $1.09 per American depositary share (“ADS”), beating both the Zacks Consensus Estimate and our model estimate of 90 cents and 85 cents, respectively. Adjusted earnings improved 25% year over year on a reported basis and 11% at a constant exchange rate (“CER”).
Quarterly revenues increased 18% on a reported basis and 9% at CER to $9.2 billion (£7.8 billion), beating both the Zacks Consensus Estimate and our model estimates of $7.8 billion and $7.4 billion, respectively. The upside can be attributed to a rise in sales across all business segments and additional sales from its COVID-19 antibody drug, Xevudy.
In July, GSK completed the spin-off of its consumer healthcare segment into a new standalone company called Haleon HLN. From second-quarter 2022 onward, GSK’s commercial operations constitute only the BioPharma business. Management now reports financial figures under three segments: Specialty Medicines, Vaccines and General Medicines.
Prior to the demerger, Haleon was a joint venture between GSK and Pfizer PFE. Pfizer holds a 32% stake in Haleon and GSK holds a 6% stake. A 54.5% stake in Haleon is held by GSK’s shareholders. Pfizer intends to sell its overall stake in Haleon.
BioPharma Business Remains Strong
Following the demerger of the consumer healthcare business, the BioPharma business includes all medicines and vaccines, including Xevudy, in GSK’s portfolio. Sales were up across all segments under the BioPharma business, especially Specialty Medicines.
Sales from commercial operations were driven by continued sales growth across all segments, especially strong sales of Shingrix, Trelegy and additional Xevudy sales. Excluding sales from Xevudy, total BioPharma sales were up 7% at CER.
Sales in the United States were up 2%. Sales in European and International markets gained 11% and 20%, respectively, at CER.
Sales of the Specialty Medicines segment surged 24% at CER, driven by consistent growth across all therapy areas. Revenues from the Specialty Medicines segment were up 11% at CER, excluding Xevudy sales. Sales growth of HIV, oncology and respiratory drugs was strong.
Xevudy generated sales of £411 million in the third quarter, compared with £466 million in the second quarter. Xevudy sales contributed 13 percentage points at CER to the Specialty Medicines segment growth. However, the drug negatively impacted adjusted margins due to its higher cost of sales. More than 90% of the drug’s sales were generated from International markets. GSK markets Xevudy in collaboration with Vir Biotechnology.
HIV sales increased 7% at CER. Sales growth of new HIV drugs — Juluca, Dovato, Cabenuva, Rukobia and Arpetude — and favorable pricing mix in the United States were partially offset by weaker sales of Triumeq and Tivicay. It is worth mentioning that GSK markets Juluca in collaboration with J&J JNJ.
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 J&J-partnered Juluca. The launch of the two-drug regimens has been eroding sales and market share of the three-drug regimens following their launch. During the third quarter, GSK and J&J’s Juluca and Dovato generated nearly 35% of total HIV sales, up from 33% in the year-ago quarter.
Sales of the dolutegravir franchise were up 1% at CER in the U.S. market and 8% in Europe. In International markets, sales were down 18% at CER.
Sales of Triumeq declined 16% at CER, while Tivicay sales fell 13% at CER. The combined sales of Dovato and J&J-partnered Juluca gained 40% at CER. Sales of Rukobia, Cabenuva and Apretude also contributed to growth. Overall, the new HIV drugs gained 64% at CER.
Sales of the immuno-inflammation drug, Benlysta, were up 15% in the quarter, reflecting growth across all regions.
Sales of the respiratory drug, Nucala, were up 18% at CER during the quarter, driven by growth in all markets.
Oncology sales were up 19% year over year, mainly driven by Zejula. Sales of Zejula rose 11% in the quarter. Sales of the drug, Blenrep, gained 32% during the quarter. The recently-launched Jemperli added £8 million to the top line in the third quarter.
Sales of General Medicines were up 1%. Loss of sales from established drugs due to generic competition was offset by the strong sales growth of respiratory drugs Trelegy Ellipta and Revlar/Breo Ellipta and the post-pandemic recovery of Augmentin sales. A few established drugs like Avamys and Flixotide also demonstrated sales growth.
Trelegy Ellipta sales surged 28% year over year, driven by strong growth in all regions. Sales of Anoro Ellipta declined 8% at CER during the third quarter. Key established drugs Advair/Seretide sales declined 23% year over year due to generic competition in all markets. Sales on Revlar/Breo Ellipta were up 11% at CER year over year.
Vaccine Sales Rise
GSK’s third-quarter vaccine sales gained 5% at CER, mainly driven by the recovery in Shingrix sales.
Shingrix sales rose 36% at CER during the quarter due to strong demand in Europe and International markets. Presently, the vaccine is available across 25 countries.
In Meningitis vaccines, Bexsero sales were up 15%, while sales of Menveo rose 14%. Sales of the influenza vaccine, Fluarix, decline 7% at CER. Sales of Established vaccines were down 2% year over year.
Operating Expenses
Adjusted selling, general and administration (SG&A) costs increased 12% year over year at CER to £1.97 billion. The increase in SG&A costs was due to the launch of products in the Specialty Medicines and Vaccines segments.
Research and development (R&D) expenses rose 8% year over year at CER to reach £1.3 billion due to continued investment by the company in mRNA technology and recently acquired Affinivax.
2022 Guidance
GSK raised its guidance for 2022. The company expects sales to increase 8% to 10% in 2022, up from the previously guided range of 6% to 8%. The guidance excludes any revenues from its COVID-related products. Management also expects a declining trend in sales of COVID-related products.
Shares of GSK moved up 2% in pre-market trading on Nov 2, likely due to the increased guidance for sales. GSK’s shares have lost 39.3% so far this year compared to the industry’s 21.9% fall.
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GSK expects sales of specialty drugs to increase low double-digit percentage at CER in 2022, while vaccine sales are expected to grow in the mid to high-teens percentage at CER for this year. The company expects strong double-digit growth for Shingrix in 2022. GSK expects broadly flat year-over-year sales growth for the General Medicines segment due to increased generic erosion of respiratory drugs.
The company expects operating profit growth to now increase between 15% to 17% at CER, up from the previous guidance of 13-15%. The company continued to maintain its guidance for adjusted EPS, which is anticipated to grow around 1% lower than operating profits.
For the fourth quarter, management expects to record stronger sales growth and incur higher R&D expenses.
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Zacks Rank
GSK currently has a Zacks Rank #3 (Hold).
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