Helped by demand for its COVID-19 therapy and shingles vaccine, GSK (GSK.L) beat first-quarter sales and earnings forecasts on April 27, as the drugmaker moves towards the July separation of its consumer health business.
The British company, which also reiterated its 2022 financial forecasts, had its shares go up about 1.7% on the day.
With CEO Emma Walmsley facing pressure from activist investor Elliot to beef up its pipeline of treatments, the spin-off of the consumer health arm, home to Advil painkillers and Sensodyne toothpaste, has increased focus on GSK’s drugs business.
GSK decided in April to acquire Sierra Oncology for $1.9 billion. Walmsley indicated in a media call on Wednesday last week that the group continued to have an appetite for deals.
Sales of 1.3 billion pounds ($1.6 billion) from COVID-19 antibody treatment Xevudy, developed with Vir Biotechnology (VIR.O) boosted turnover in the three months to March 31.
Beating analysts’ expectations of 1.1 billion pounds, sales of the drug – known chemically as sotrovimab – were also in line with what the therapy brought in throughout 2021.
Recent data suggested the therapy was, however, unlikely to be effective against the BA.2 subvariant dominant in the top buyer the United States. As a result, the therapy has been pulled off the market in the region by U.S. regulators.
Walmsley said GSK is continuing discussions with governments outside the United States where it remains authorized.
The company’s 2022 guidance does not include sales of Xevudy and other COVID-related products. GSK continues to predict underlying operating profit growth of 12-14% and underlying revenue growth of 5-7% for this year.
GSK has seen some under-loved parts of its portfolio start to recover thanks to the waning of the pandemic, said Laura Hoy analyst Hargreaves Lansdown.
For example, GSK’s top-selling vaccine, Shingrix saw an upturn in demand in the quarter, following the interruption to adult immunizations during much of the pandemic. Walmsley said:
“We’re seeing definite underlying demand return.”
During quarterly sales, the shingles vaccine generated 698 million pounds, outdoing analyst estimates of 528 million. Third Bridge analyst Sebastian Skeet said:
“Key revenue driver Shingrix’s performance was encouraging … although recent data points to prescription levels still significantly below pre-pandemic volumes. Longer-term, mRNA vaccines pose a threat.”
AlphaValue analyst Amandeep Goyal said the quarterly results indicate the company mainly recovering from a fall in demand for some products last year. However, there are no assurances this outperformance will be repeated in the upcoming quarters.
Even though multiple companies have abandoned or delayed listing plans amid market jitters over the Ukraine crisis, GSK is pressing on with the spin-off of the consumer health business, now called Haleon.
The company, whose business in Ukraine and Russia account for less than 1% of sales, recorded a rise in costs in the quarter, somewhat as a result of provisions it set aside for the crisis. GSK did not provide a breakdown of those provisions.
The London-listed company has pressed pause on any new clinical activity in Russia and has very limited clinical trial activity in Ukraine.
“We’re trying to maintain continuity wherever possible.”
He added that GSK was not expecting any crucial impact on development programs because of the crisis.