ii view: should you back GSK to deliver ‘meaningful’ growth in 2024?

Full-year results to 31 December

• Revenue up 5% to £30.3 billion
• Adjusted operating profit up 12% to £8.8 billion
• Fourth-quarter dividend of 14p per share, up from 12p in Q3
• Net debt down 13% year-over-year to £15 billion

Guidance:

• Expects full-year 2024 revenue growth of between 5% and 7%
• Expects adjusted operating profit growth of between 7% and 10%
• Expects to pay a total 2024 dividend of 60p per share, up from 58p in 2023

Chief Executive Emma Walmsley said:

“We are now planning for at least 12 major launches from 2025, with new Vaccines and Specialty Medicines for infectious diseases, HIV, respiratory and oncology. As a result of this progress and momentum, we expect to deliver another year of meaningful sales and earnings growth in 2024.”

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ii round-up:

Headquartered in the UK, GSK (LSE:GSK) is a global pharmaceutical company operating across the three areas of Specialty Medicines, General Medicines, and Vaccines. Each generates approximately a third of group sales.  

Specialty sales include those for HIV treatments, generating just over a fifth of the group total.

General Medicine sales include those for Respiratory conditions. Vaccine sales include those for Shingles at around a tenth of overall sales, and Meningitis and Respiratory Syncytial Virus or RSV (Arexvy) preventives, each accounting for around 4% of total sales. 

For a round-up of these latest results announced on 31 January, please click here. 

ii view:

Formed in 2000 via a merger of Glaxo Welcome and SmithKline Beecham, GSK is today the seventh-largest company in the FTSE 100 index, employing over 65,000 people. Geographically, the US is by far its biggest market at just over a half of total sales. UK stock market listed rivals include AstraZeneca (LSE:AZN) and Hikma Pharmaceuticals (LSE:HIK). 

For investors, pressure to develop new blockbuster drugs is a constant across the pharma industry, and generic competition continues to impact General medicine sales, with revenue falling 2% in this latest quarter. Costs generally for businesses also remain elevated, while potential legal claims in relation to alleged unintended drug effects are an ongoing worry across the industry.  

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More favourably, the 2022 separation of its Haleon (LSE:HLN) consumer healthcare business arguably leaves management more focused on pharma growth. For both Vaccines and Specialty medicines, 18 development drugs are in final stage or Phase III trials, management has raised expectations for 2031 sales to £38 billion from £33 billion, while robust cashflows helped net debt reduce 13% year-over-year to £15 billion. 

For now, and despite continued risks, a consensus analyst estimate of fair value at over £19 per share plus forecast dividend yield of around 3.6%, should be sufficient to keep long-term investors happy.

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