It has been about a month since the last earnings report for GSK (GSK). Shares have added about 8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Glaxo due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Q4 Earnings & Sales Beat
GSK reported core earnings of 59 cents per American depositary share (ADS), which beat the Zacks Consensus Estimate of 53 cents. Core earnings declined 20% year over year on a reported basis and 10% at a constant exchange rate (CER) due to increased operating expenses during the quarter.
Quarterly revenues rose 1% on a reported basis and 4% at CER to $10.4 billion (£8.12 billion). Revenues beat Zacks Consensus Estimate of $10.00 billion.
Strong growth from Specialty and General Medicines more than offset decline in Vaccine sales.
Sales in the United States rose 1%. Sales in Europe rose 10%, while that in International markets rose 8% at CER.
All growth rates mentioned below are on a year-on-year basis and at CER.
Quarterly Highlights
GSK reports under three segments: Specialty Medicines, Vaccines and General Medicines. Specialty Medicines, Vaccines and General Medicines are clubbed as commercial operations.
Specialty Medicines
Sales in the Specialty Medicines segment rose 17%. Sales grew in double digits in HIV, Immunology/Respiratory as well as Oncology segments.
HIV sales rose 14% driven by strong demand and increased market share for oral two-drug regimens, Dovato and Juluca, and long-acting regimens like Cabenuva and Apretude.
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 Juluca.
Sales from its dolutegravir franchise rose 8% in the quarter. While sales of the dolutegravir franchise were up 10% in the United States, it rose 5% in Europe and 7% in International markets.
While Triumeq sales declined 11%, sales of Tivicay rose 1% during the quarter.
Juluca rose 10% while Dovato was up 27% in the quarter.
Rukobia sales rose 46% in the quarter.
Sales of new long-acting medicines, Cabenuva and Apretude, rose 43% and 65%, respectively in the quarter. The growth of these products comes from strong patient demand. These two long-acting medicines contributed more than 50% of the total HIV growth and now account for 20% of HIV sales.
In 2025, GSK expects HIV sales to grow by a mid-single-digit percentage as higher volumes will be partially offset by pricing headwinds with the introduction of the IRA which is expected to have a negative impact of £150- £200 million.
Oncology sales rose 72%, driven by strong patient demand for Jemperli and Ojjaara
Zejula sales fell 3% in the quarter. Though the drug’s U.S. sales were adversely impacted due to favorable price impacts in the year-ago period, continued growth in Europe and International markets partially offset the same. Jemperli added £149 million to GSK’s top line compared with £130 million in third-quarter 2024, driven by increased patient uptake in the United States following approval for a broader patient population in August 2024.
New blood cancer drug Ojjaara/Omjjara generated £118 million in product sales compared with £98 million in third-quarter 2024 driven by continued strong uptake in the United States. Contributions from Europe and International are also increasing, following launches in the UK, Germany and Japan.
Respiratory/Immunology and Other sales were up 9% in the fourth quarter. Sales of the respiratory drug Nucala were up 7% at CER, driven by strong patient demand in Europe and International market, partially offset by United States from channel inventory build in the fourth quarter of 2023.
Sales of the immuno-inflammation drug Benlysta were up 12% driven by strong demand and volume growth in all regions. Benlysta sales benefited from bio penetration growth from earlier intervention in SLE and lupus nephritis. However, sales of Benlysta were somewhat hurt in the quarter due to channel inventory build in the United States in the fourth quarter of 2023.
GSK generated £11 million in sales from Xevudy during the quarter.
Sales in the Specialty Medicines segment are expected to increase in low double-digit percentage at CER in 2025.
General Medicines
Sales of General Medicines were up 6% during the quarter. This upside was driven by solid sales growth of the asthma inhaler Trelegy Ellipta across all regions, reflecting patient demand. The adverse impact of removing the Average Manufacturer Price (AMP) cap on Medicaid drug prices in the United States was offset by the use of authorized generic versions of Advair and Flovent.
In General Medicines, Respiratory sales rose 7% at CER, while Other General Medicines sales rose 3%
Trelegy Ellipta sales surged 17% during the quarter, owing to strong growth in all regions. Sales of Anoro Ellipta declined 2%. Key established drug Advair/Seretide sales declined 2%, while sales on Revlar/Breo Ellipta declined 5%. Ventolin sales declined%.
In General Medicines, sales are expected to be broadly stable at CER in 2025 as volume growth across key brands is likely to be offset by pricing and genericization pressures.
Vaccines
GSK’s fourth-quarter Vaccine sales declined 12% due to lower sales of its RSV vaccine Arexvy and shingles vaccine, Shingrix.
Arexvy generated £158 million during the quarter, down 69% year over year due to lower demand as a result of new ACIP guidelines. Sales declined 48% in International markets due to lower demand in Canada.
Shingrix sales fell 4% during the quarter as sales declined due to lower demand in the U.S. and International markets. This was partially offset by rising sales in Europe. U.S. sales of the vaccine declined 13% in the quarter due to lower demand, driven by challenges activating harder-to-reach consumers. Sales rose 15% in Europe due to expanded public funding and higher uptake in several countries which was partially offset by lower demand in Germany. In International markets, sales declined 5% due to lower sales in China.
Presently, Shingrix is available across 52 countries outside the United States and ex U.S. sales represented 56% of global sales.
In Meningitis vaccines, sales of Bexsero rose 39%, while Menveo sales declined 41%. Sales of the influenza vaccine, Fluarix, rose 14%. Sales of Established vaccines improved 8%.
During the quarter, GSK did not record any sales from the COVID-19 booster vaccine co-developed in partnership with Sanofi.
Vaccine sales are expected to decline by a low single-digit percentage at CER in 2025. GSK does not expect any further COVID-19-related sales in 2025.\
Profit Discussion
Adjusted operating profit declined 10% at CER to £1.43 billion due to charges to drive future supply efficiencies, higher operating costs and lower royalty income.
Adjusted selling, general and administration (SG&A) costs rose 6% to £2.70 billion due to investments made to promote the key products, Arexvy, Nucala, Shingrix, Jemperli and long-acting HIV drugs. Adjusted research and development (R&D) expenses rose 4% to £1.82 billion.
2025 Guidance
GSK issued fresh guidance for 2025. It expects sales to increase 3-5% in 2025. GSK expects its Specialty Medicines segment to drive sales growth in 2025 with General Medicines segment remaining stable to be partially offset by lower Vaccines sales. In 2025, GSK expects a negative sales impact of £400-500 million due to pressure from the implementation of IRA.
Sales growth is expected to be weighted towards the second half of the year.
GSK also announced plans to buyback up to £2 billion of shares over the next 18 months.
GSK expects both core operating profit and core EPS to grow in the range of 6-8% including the impact of the share buyback program. R&D is expected to increase at a rate similar to sales growth. SG&A is expected to grow in a low single-digit percentage. Royalty income is expected to be in the range of £650-700 million.
The adjusted tax rate is expected to be around 17.5%.
In 2025, the company plans to pay a dividend of 64p, an increase of 5% year over year.
Ups Long-Term Guidance
GSK raised its long-term sales outlook for 2031. It now expects to generate sales of more than £40 billion, an increase from its previous projection of more than £38 billion. The increase was fueled by inclusion of potential revenues from Blenrep, multiple new drug/line extension launch opportunities and late-stage pipeline progress. Specialty Medicines is expected to be more than 50% of sales by 2031.
However, GSK maintained its guidance for the period 2021-2026 of sales to grow more than 7% and core operating profit to increase more than 11% on a CAGR basis. Core operating margin is still expected to be more than 31%.
For the period 2021-2026, Specialty Medicines is expected to rise in low-to-mid teens percentage versus prior expectation of double-digit percentage. Vaccines is expected to rise in mid-to-high single digits versus prior expectation of low double-digit percentage. General Medicines has outperformed expectations. The company raised its 2021-2026 CAGR for General Medicines to low-single digit percentage from prior expectation of being stable.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Glaxo has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Glaxo has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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