GSK's Beats on Q4 Earnings & Sales, Issues Upbeat 2023 Outlook
GSK plc GSK reported fourth-quarter 2022 adjusted earnings of 61 cents per American depositary share (“ADS”), beating the Zacks Consensus Estimate of 59 cents. Adjusted earnings improved 10% year over year on a reported basis but declined 6% at a constant exchange rate (CER).
Quarterly revenues increased 4% on a reported basis but declined 3% at CER to $8.7 billion (£7.4 billion), beating both the Zacks Consensus Estimate and our model estimates of $8.3 billion and $7.7 billion, respectively. The upside can be attributed to a rise in sales across all business segments, offsetting the declining sales of its COVID-19 antibody drug, Xevudy.
In the trailing 12 months, GSK’s shares have lost 38.3% compared with the industry’s 10.8% fall.
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Last July, GSK completed the spin-off of its consumer healthcare segment into a new standalone company called Haleon. Following the demerger, GSK’s commercial operations now constitute only the BioPharma business. Management reports financial figures under three segments — Specialty Medicines, Vaccines and General Medicines.Specialty Medicines, Vaccines and General Medicines are clubbed as commercial operations.
Sales of the Specialty Medicines segment fell 11% at CER due to the declining sales of Xevudy. Revenues from the Specialty Medicines segment were up 21% at CER, excluding Xevudy sales. Sales growth of HIV, oncology and respiratory drugs was also strong.
Xevudy generated sales of £125 million in the fourth quarter, compared with £411 million in the third quarter. The majority of the drug’s sales were generated from International markets. GSK markets Xevudy in collaboration with Vir Biotechnology VIR.
Last April, the FDA withdrew the emergency use authorization (EUA) granted to GSK/Vir Biotechnology’s Xevudy. The withdrawal decision for the Vir Biotechnology-partnered antibody therapy was based on data that showed that it was unlikely for the Xevudy dose to be effective against the Omicron variant.
HIV sales increased 21% at CER, driven by sales growth of new HIV drugs — Juluca, Dovato, Cabenuva, Rukobia and Apretude — and a favorable pricing mix in the United States. Management also witnessed growth of three-drug regimen HIV drugs — Tivicay and Triumeq — whose combined sales were up 15% at CER. 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 fourth quarter, GSK and J&J’s Juluca and Dovato generated nearly 37.5% of total HIV sales, up from 35% in third-quarter 2022.
Sales of the dolutegravir franchise were up 16% at CER in the U.S. market and 3% in Europe. In International markets, sales were down 21% at CER.
Sales of Triumeq declined 8% at CER, while Tivicay sales were up 5% at CER. The combined sales of Dovato, J&J-partnered Juluca, Rukobia, Cabenuva and Apretude gained 70% at CER.
Sales of the immuno-inflammation drug, Benlysta, were up 20% 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 11% year over year, mainly driven by Zejula. Sales of Zejula rose 8% in the quarter. Sales of the drug, Blenrep, gained 14% during the quarter. The recently-launched Jemperli added £5 million to the top line in the fourth quarter.
Sales of General Medicines were in line with the year-ago quarter. Loss of sales from established drugs due to generic competition was offset by the strong sales growth of respiratory drugs Trelegy Ellipta and Flixotide/Flovent and the post-pandemic recovery of Augmentin sales. A few established drugs like Avamys and Ventolin also demonstrated sales growth.
Trelegy Ellipta sales surged 19% year over year, driven by strong growth in all regions. Sales of Anoro Ellipta were up 5% at CER during the fourth quarter. Key established drugs Advair/Seretide sales declined 6% year over year due to generic competition in all markets. Sales on Revlar/Breo Ellipta were down 15% at CER year over year.
Vaccine Sales Rise
GSK’s fourth-quarter vaccine sales gained 7% at CER, driven by the recovery in Shingrix sales.
Shingrix sales rose 18% at CER during the quarter due to strong demand in Europe and International markets.
In Meningitis vaccines, Bexsero sales were up 13%, while sales of Menveo rose 50%. Sales of the influenza vaccine, Fluarix, were up 2% at CER. Sales of Established vaccines were up 4% year over year.
Adjusted selling, general and administration (SG&A) costs increased 13% year over year at CER to £2.44 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 1% year over year at CER to reach £1.52 billion due to continued investment by management for pipeline advancement and the recently acquired Affinivax.
GSK issued its guidance for 2023. The company expects sales to increase 6% to 8% in 2023.
Management expects sales of specialty medicines to increase mid to high single-digit percentage at CER in 2023, while vaccine sales are expected to grow in the mid-teens percentage at CER. However, management expects a slight decline in turnover for the General Medicines segment due to increased generic erosion of respiratory drugs.
The company expects adjusted operating profit growth to increase between 10% to 12% at CER. GSK also provided guidance for its adjusted EPS, which is anticipated to grow in the range of 12% and 15%.
The above guidance excludes any revenues from its COVID-related products. If management were to add COVID sales, it expects a reduction of approximately 9% in turnover growth as well as decline in adjusted operating profit growth by 6% to 7%. Management does not expect significant COVID-19 related sales in 2023.
The company also expects to record slightly lower turnover and adjusted operating profit growth in first-half 2023.
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Zacks Rank & Key Picks
GSK currently has a Zacks Rank #3 (Hold). A better-ranked stock in the overall healthcare sector is Sanofi SNY, which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Estimates for Sanofi’s 2022 bottom line have increased from $4.16 to $4.32 in the past 30 days. Earnings estimates for 2023 have increased from $4.31 to $4.41 during the same period.Shares of Sanofi have declined 4.8% in the past year.
The earnings of Sanofi beat estimates in each of the last four quarters, with the average surprise being 9.50%. In the last reported quarter, SNY delivered an earnings surprise of 9.85%.
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