Pharmaceutical company GSK (GSK) beat second-quarter expectations with revenue excluding Covid-19 solutions and adjusted operating profit both up 11% to $7.1 billion and $2.2 billion respectively.

After exceeding prior full year guidance at the halfway point, and with the expectation of continued momentum in the second half, management therefore increased its sales and profit guidance.

Investors welcomed the upgrade with the shares gaining nearly 1% to a new month-high of £14.05.

WHAT ARE THE FINANCIAL IMPLICATIONS?

Sales growth guidance is raised to between 8% and 10% from 6% to 8% and adjusted operating profit growth is now expected to be 11% to 13%, up from 10% to 12% previously.

This reflects higher sales and royalty income, partially offset by increased expenses related to new product launches, while research and development is expected to increase at a rate slightly below sales growth.

Chief executive Emma Walmsley commented: ‘Our momentum supports the upgrade we have made to our financial guidance for 2023 and further increases our confidence in delivering longer-term profitable growth for shareholders.

‘We have delivered another excellent quarter of performance, with strong sales and earnings growth, notably in HIV and Vaccines, and continued strengthening of the R&D pipeline and product portfolio.

‘The approval of Arexvy, the world's first RSV vaccine, was an important milestone for us and is at the forefront of a next wave in vaccine innovation for GSK.

EXPERT VIEWS

Pharmaceutical analyst Sean Conroy at Shore Capital believes initial sales from Arexvy should start to come through in the second half. ‘This vaccine has potential to surprise the street’s initial expectations as Shingrix did,’ said Conroy.

AJ Bell's head of financial analysis Danni Hewson commented: ‘The British drugmaker delivered a crowd-pleasing performance bolstered by strong sales of both its shingle vaccine and HIV medicines, but there are still big questions for investors to ponder.’

‘Whilst GSK saw investor confidence rebound slightly after it announced it had settled its first Zantac court case, there is still a long way to go.’

‘Its core business might be delivering gangbusters but a drugmakers real value is found in its pipeline and there’s nothing in this set of results to set pulses racing.’

Zhyar Said, senior healthcare analyst at global pharmaceutical intelligence firm Citeline, commented: ‘Despite GSK’s Q2 sales being on the up, it is uncertain how long the positive streak will last.

‘GSK seems to be heavily dependent on Arexvy and Shingrix’s performance. With Pfizer’s competitor to Arexvy, Abrysvo, already gaining US approval and with an EU approval imminent, GSK won’t be reaping all the rewards that they would hope to.’

Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor of the article (Ian Conway) own shares in AJ Bell.

LEARN MORE ABOUT GSK

 

---