ii view: GSK confidence underpinned by cancer and HIV sales

Third-quarter results to 30 September

• Currency adjusted revenue up 2% to £8 billion
• Vaccines sales -15%; Specialty Medicines sales +19%; General Medicines sales +7%
• Adjusted operating profit up 5% to £2.76 billion
• Quarterly dividend of 15p per share, unchanged from Q2
• Net debt down 27% from late December to £12.85 billion

Guidance:

• Continues to expect full-year revenue growth of between 7% and 9%
• Continues to expect core operating profit growth of between 11% and 13%
• Continues to expect to pay a total full-year dividend of 60p per share, up from 58p in 2023

Chief Executive Emma Walmsley said:

"We have delivered another quarter of sales and core operating profit growth, and further good progress in R&D. Our pipeline continues to strengthen. We also resolved the vast majority of Zantac litigation in the quarter, to remove uncertainty and so we can focus forward. 

“All this means we are on track to deliver our 2024 guidance, and we are even more confident in our 2026 and 2031 outlooks."

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ii round-up:

Drug maker GSK (LSE:GSK) operates across the three arenas of Specialty Medicines, General Medicines, and Vaccines. Each generated around a third of overall group sales during 2023.

For round-up of these latest results, please click here.

ii view:

Formed in 2000 via a merger of Glaxo Welcome and SmithKline Beecham, GSK today competes against UK and overseas drug makers such as AstraZeneca (LSE:AZN), Johnson & Johnson (NYSE:JNJ), Merck & Co Inc (NYSE:MRK) and Pfizer Inc (NYSE:PFE). A constituent of the FTSE 100 index, it employs over 65,000 people. Geographically, the US is by far the group’s biggest market at 52% of sales during 2023, while the UK came in at just over 2%. 

For investors, President elect Donald Trump's appointment of vaccine sceptic Robert F Kennedy Jr places some doubt over future US demand for GSK’s suite of vaccine products. Currency adjusted sales rose only 2% during this latest quarter. Drug development is an expensive and risky business, while litigation for drug side effects and government investigations are now common for the industry as a whole.  

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More favourably, speciality drugs including those for high profit margin cancer and HIV led sales during this latest quarter, climbing 19%. Uncertainty regarding Zantac litigation has been largely removed. New drug development remains ongoing, with 11 positive phase III trials reported year-to-date. Core Selling, General & Administrative costs have continued to improve as a percentage of sales, while share sales for former group business Haleon have helped reduce group net debt. 

For now, and while slow revenue growth will generate some caution, a forecast dividend yield of over 4% and consensus analyst fair value estimate above £18 per share, look to give grounds for longer term optimism. 

Positives

• Defensive qualities. Consumers need medicines even in a recession
• Artificial Intelligence or AI could favourably impact future drug development

Negatives

• Generic competition
• Currency movements can hinder

The average rating of stock market analysts:

Strong hold