Glaxo (GSK) Beats on Q3 Earnings, Gives Improved EPS View

GlaxoSmithKline plc GSK reported third-quarter 2021 adjusted earnings of $1.01 per American depositary share (“ADS”), comfortably beating the Zacks Consensus Estimate of 80 cents. Adjusted earnings were up 3% year over year on a reported basis and 10% at a constant exchange rate (“CER”).

Quarterly revenues gained 5% on a reported basis and 10% at CER to $12.5 billion (£9.1 billion), beating the Zacks Consensus Estimate of $11.92 billion. The growth was driven by growth across all segments and additional sales from COVID-19 related products.

Shares of Glaxo have gained 9.8% so far this year compared with the industry’s 12.7% increase.

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Glaxo reports financial figures under three segments: Pharmaceuticals, Vaccines and Consumer Healthcare.

Respiratory Business Remains Strong

Pharmaceuticals sales were up 10% at CER driven by higher sales of new and specialty drugs, partially offset by weaker sales of the Established Pharmaceuticals segment, which were down by 4%. Excluding the impact of Established Pharmaceuticals segment, Pharmaceuticals sales grew 24% year over year at CER.

Sales in the United States were up 23%. Sales in European and International markets gained 2% and 12%, respectively, at CER.

Respiratory sales were up 33% at CER, mainly on the back of higher sales of Trelegy, and Nucala. Robust sales of oncology and immuno-inflammation drugs also aided Respiratory segment’s revenues. Nucala sales were up 20% at CER during the quarter driven by growth in all markets. Trelegy Ellipta sales surged 77% year over year driven by strong growth in all regions.

Sales of Anoro Ellipta decreased 2% at CER during the third quarter.

HIV sales increased 8% year over year at CER mainly driven by new drugs and favorable wholesaler purchasing patterns in the United States as well as international tenders. Sales of dolutegravir franchise were up 6%.

The dolutegravir franchise comprises two three-drug regimens — Triumeq and Tivicay — and a couple of two-drug regimens — Juluca and Dovato. Strong growth in sales of two-drug regimens in the third quarter was partially offset by a decline in the sales of the three-drug regimens. Sales of new HIV drugs — Rukobia and Vabenuva — also contributed to growth.

Sales of the dolutegravir franchise were up 7% at CER in the U.S. market and 5% in Europe. In International markets, sales were up 8% at CER. Please note that Glaxo markets Juluca in collaboration with J&J JNJ.

Sales of the immuno-inflammation segment rose 32% mainly on the back of strong demand for Benlysta. Sales of Benlysta were up 35% in the quarter, reflecting the impact of label expansion of the drug for treating active lupus nephritis in the United States and Japan last year.

Oncology sales were up 34% year over year, mainly driven by Zejula. Sales of Zejula rose15% in the quarter. Sales of the recently-approved drug, Blenrep doubled.

The company recorded £114 million from sales of its COVID-19 therapy, Xevudy (sotrovimab), which includes international sales of £97 million. The monoclonal antibody treatment was granted emergency use authorization for patients at risk of hospitalization in the United States in May. The company developed it in collaboration with Vir Biotechnology VIR.

Sales of Established Pharmaceuticals were down 4% year over year due to loss of sales to generic competition. Advair/Seretide sales declined 8% year over year due to generic competition in all markets.

Consumer Healthcare Sales Up

Sales in the Consumer Healthcare segment increased 8% at CER. Glaxo formed a new joint venture (“JV”) with Pfizer PFE in 2019 to create the world’s largest Consumer Healthcare business. Excluding sales of brands divested or under review for divestment, sales were up 10%.

Sales of Pain relief and Oral health categories increased 13% and 5%, respectively, in the quarter. Sales of Vitamins, minerals and supplements category were up 19% in the third quarter. Sales of Respiratory health gained 16%. Digestive health and other category sales were up 3%.

Shingrix Sales Recover

Glaxo’s third-quarter vaccine sales growth of 13% at CER was led by strong recovery in Shingrix sales together with pandemic adjuvant sales. Shingrix sales were up 41% during the quarter.

In Meningitis vaccines, Bexsero sales increased 9% while sales of Menveo were up 30%. Sales of influenza vaccine Fluarix were up 8%. Sales of Established vaccines were up 8% year over year.

During the quarter, Glaxo recorded sales of £95 million from its pandemic vaccines, including £94 million of pandemic adjuvant sales. The company recorded the revenues primarily from the supply of adjuvant to the U.S. and Canada governments.

Operating Expenses

Selling, general and administration (SG&A) costs increased 7% at CER year over year to £2.5 billion. The increase in SG&A costs was led by the launch of products in Pharmaceuticals and Vaccines segments.

Research and development (R&D) expenses gained 15% at CER to reach £1.17 billion, reflecting higher clinical activity in the Specialty, Oncology and Vaccine portfolios.

2021 Guidance Updated

Glaxo increased its guided range for adjusted earnings for 2021. It now expects adjusted earnings to decline 2-4% at CER compared to the previously guided mid- to high-single-digit percentage decline.

It anticipates full-year sales for the Pharmaceutical segment to grow in low-single-digit percentage. Sales of the Consumer Healthcare segment is expected to increase in low to mid-single digits, excluding brands divested/under review. The company expects vaccine sales for the year to decline in mid-single digit percentage.

Our Take

Glaxo beat estimates for both earnings and revenues on the back of strong recovery across all segments. Meanwhile, loss of Advair sales due to generic competition and competitive pricing will continue to hamper revenues. However, the company’s new products in the Respiratory and Oncology segment, and two-drug HIV regimens continued to perform well in the reported quarter.

Glaxo stated that the anticipated recovery in Shingrix sales was delayed by the surge in the Delta variant, particularly in the U.S. retail channel. However, this was more than offset by strong growth in the non-retail channel. The company anticipates Shingrix sales to be weak in the last quarter of 2021.

GlaxoSmithKline plc Price, Consensus and EPS Surprise

GlaxoSmithKline plc Price, Consensus and EPS Surprise

GlaxoSmithKline plc price-consensus-eps-surprise-chart | GlaxoSmithKline plc Quote

Zacks Rank

Glaxo currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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