Why Is Glaxo (GSK) Up 6.7% Since Last Earnings Report?

A month has gone by since the last earnings report for GSK (GSK). Shares have added about 6.7% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Glaxo due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Q3 Earnings Beat, 2022 Sales View Up

GSK reported third-quarter 2022 adjusted earnings of $1.09 per American depositary share (“ADS”), beating both the Zacks Consensus Estimate and our model estimate of 90 cents and 85 cents, respectively. Adjusted earnings improved 25% year over year on a reported basis and 11% at a constant exchange rate (“CER”).

Quarterly revenues increased 18% on a reported basis and 9% at CER to $9.2 billion (£7.8 billion), beating both the Zacks Consensus Estimate and our model estimates of $7.8 billion and $7.4 billion, respectively. The upside can be attributed to a strong performance in Specialty Medicines and Vaccines. Excluding sales from COVID products, total sales were up 7% at CER.

Foreign exchange had a favorable impact 9% on sales and 14% on adjusted earnings per share in the third quarter.

Sales in the United States were up 2%. Sales in European and International markets gained 11% and 20%, respectively, at CER.

All growth rates mentioned below are on a year-on-year basis and at CER.

Quarterly Highlights

GSK reports under three segments: Specialty Medicines, Vaccines and General Medicines. Specialty Medicines, Vaccines and General Medicines are clubbed as commercial operations.

In July, GSK completed the spin-off of its Consumer Healthcare segment into a new standalone company called Haleon. From second-quarter onward, the Haleon business was presented as a discontinued operation.

Specialty Business Remains Strong

Sales of the Specialty Medicines segment surged 24% at CER, driven by strong demand for HIV medicines, Nucala and Benlysta. Revenues from the Specialty Medicines segment were up 11% at CER, excluding COVID-related sales.

HIV sales increased 7% at CER. Higher demand for new HIV drugs — Juluca, Dovato, Cabenuva, Rukobia and Arpetude — and a favorable pricing mix in the United States were partially offset by unfavorable timing of U.S. customer orders and International tender decline.

Overall, sales of the new HIV drugs increased 64% at CER and comprised 44% of the total HIV portfolio in the third quarter.

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 Juluca. The launch of the two-drug regimens has been eroding sales and market share of the three-drug regimens following their launch.

Sales of the dolutegravir franchise were up 1% at CER in the U.S. market and 8% in Europe. In International markets, sales were down 18% at CER.

Sales of Triumeq declined 16% at CER while Tivicay sales slumped 13% at CER. Juluca was up 8% while Dovato was up 60% in the third quarter.

New medicines Rukobia, Cabenuva and Apretude contributed £21 million, £101 million, £10 million, respectively to revenues compared with £19.0 million, £72 million and £26 million, respectively in the previous quarter.

Oncology sales were up 19% year over year, mainly driven by Zejula. Sales of Zejula rose 11% in the quarter. Sales of the drug, Blenrep, gained 32% during the quarter driven by strong growth in Europe. New drug Jemperli added £8 million to the top line in the third quarter.

Immuno inflammation, respiratory and others sales were up 17% in the third quarter. Sales of the respiratory drug, Nucala, were up 18% at CER during the quarter, driven by strong demand trends and approvals/launch of additional indications globally. Sales of the immuno-inflammation drug, Benlysta, were up 15% in the quarter, reflecting strong underlying demand in the United States and worldwide.

Xevudy generated sales of £411 million in the third quarter, compared with £466 million in the second quarter. Xevudy sales contributed 13 percentage points at CER to the Specialty Medicines segment growth. However, the drug negatively impacted adjusted margins due to its higher cost of sales. More than 90% of the drug’s sales were generated from International markets.

General Medicines

Sales of General Medicines were up 1%. Loss of sales from established drugs due to generic competition was offset by the strong sales growth of respiratory drugs, Trelegy Ellipta and Revlar/Breo Ellipta and increasing demand for Augmentin due to the post-pandemic rebound of the antibiotic market.

In General Medicines, Respiratory sales were up 4% at CER, while Other General Medicines sales declined 4%.

Trelegy Ellipta sales surged 28% year over year, driven by strong growth in all regions. Sales of Anoro Ellipta declined 8% at CER during the third quarter. Key established drugs Advair/Seretide sales declined 23% year over year due to generic competition in all markets. Sales on Revlar/Breo Ellipta were up 11% at CER year over year.

In 2022, GSK expects sales of specialty drugs (excluding Xevudy sales) to increase at a low double-digit percentage at CER while sales of General Medicines are expected to be broadly flat due to the generic erosion of respiratory drugs. Previously, GSK expected sales of specialty drugs (excluding Xevudy sales) to increase 10% while sales of General Medicines was expected to decline slightly.

Vaccine Sales Recovery Continues

GSK’s third-quarter vaccine sales gained 5% at CER, mainly driven by the recovery in Shingrix sales.

The third quarter of last year had benefited from pandemic adjuvant vaccine sales that were not repeated in the third quarter of 2022. Vaccine sales were up 9% at CER, excluding unrepeated 2021 pandemic adjuvant sales.

Overall, the second quarter of 2022 benefited from favorable comparison to the third quarter of 2021 in which vaccine sales were hurt by COVID-19 related disruptions in several markets. The post-pandemic rebound and strong Shingrix sales benefited total vaccine sales, which were partially offset by MMR/V vaccines supply constraints and CDC stockpile borrows.

Shingrix sales rose 36% at CER during the quarter due to strong commercial execution in Europe and International markets, post-pandemic rebound and the growing impact of new launches. In the United States, Shingrix sales benefited from higher demand in both retail and non-retail channels, which was partly offset by expected unfavorable wholesaler inventory movements. Presently, the vaccine is available across 25 countries with two new launches during the third quarter.

In Meningitis vaccines, Bexsero sales were up 15%, while sales of Menveo rose 14%. Sales of the influenza vaccine, Fluarix, declined 7% at CER. Sales of Established vaccines were down 2% year over year.

In 2022, the company expects vaccine sales to grow at mid to high-teens percentage at CER (previously low to mid-teens percentage), excluding pandemic solutions.

For Shingrix, GSK expects double-digit growth to be driven by strong demand in existing markets and geographical expansion. Fourth-quarter growth is expected to be lower than the third quarter due to an expected inventory burn in the United States.

Profit Discussion

Adjusted operating profit rose 4% at CER in the period as higher sales and royalty income and lower taxes and interest expenses offset the impact from low margin Xevudy sales and higher SG&A costs. Operating profit rose 2%, excluding COVID solutions. Adjusted operating margin declined 1.6 percentage points in the quarter at CER to 33.3%.

Adjusted selling, general and administration (SG&A) costs increased 12% year over year at CER to £1.97 billion. The increase in SG&A costs was due to launch investments in Specialty Medicines and Vaccines segments and increased freight and distribution costs.

Research and development (R&D) expenses rose 8% year over year at CER to reach £1.3 billion due to investments in Vaccines clinical development, including in mRNA technology platforms, and MAPS following the Affinivax acquisition and costs related to key late-stage candidates like depemokimab and momelotinib and several early discovery programs.

2022 Guidance

GSK raised its guidance for 2022. The company expects sales to increase 8% to 10% in 2022, up from the previously guided range of 6% to 8%, with improving outlook in all three product areas. The guidance excludes any revenues from its COVID-related products (Xevudy and pandemic vaccine adjuvant).

The company expects operating profit growth to now increase between 15% and 17% at CER, up from the previous guidance of 13-15%. The company expects the year-on-year impact from COVID solutions to reduce adjusted operating profit growth by around 4% in 2022.

The company maintained its guidance for adjusted EPS, which is anticipated to grow around 1% lower than operating profits.

With regard to its COVID-19 solutions, GSK expects sales to be substantially lower in the second half. GSK said that the majority of expected COVID-19 solutions sales for 2022 were already achieved in the first nine months of 2022.

Currency changes are expected to positively impact 2022 sales by 7% and operating profit by 13%.

For the fourth quarter, management expects to record stronger sales growth and relatively higher R&D expenses.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -8.15% due to these changes.

VGM Scores

Currently, Glaxo has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Glaxo has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Glaxo is part of the Zacks Medical - Biomedical and Genetics industry. Over the past month, Repligen (RGEN), a stock from the same industry, has gained 8.5%. The company reported its results for the quarter ended September 2022 more than a month ago.

Repligen reported revenues of $200.74 million in the last reported quarter, representing a year-over-year change of +12.6%. EPS of $0.77 for the same period compares with $0.78 a year ago.

For the current quarter, Repligen is expected to post earnings of $0.58 per share, indicating a change of -28.4% from the year-ago quarter. The Zacks Consensus Estimate has changed -8.7% over the last 30 days.

Repligen has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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