ii view: GSK balances R&D spend with cost savings

New plans to accelerate growth and Q2 results

• Currency adjusted sales rose 5% from a year ago to £8.4 billion
• Currency adjusted core earnings up 9% to 50.5 US cents per share
• A quarterly dividend of 17p per share, up from 16p last year

Guidance:

• Continues to expect growth in currency adjusted annual revenues of between 3% and 5%
• Continues to expect growth in currency adjusted annual earnings of between 7% and 9%

Chief executive Luke Miels said:

"GSK has delivered another quarter of strong core results performance, with our key growth drivers performing well. We remain focused on operational delivery, execution, and accelerating R&D."

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ii round-up:

GSK (LSE:GSK)’s push to accelerate growth under relatively new CEO Luke Miels took another step forward today.

Newly announced initiatives included accelerating R&D spend to over 20 Phase III trial starts in 2026 from a previous 10, with R&D funding helped by a new three-year cost savings program targeting £1.9 billion in annual savings by 2029.

Generated savings will also help counter the loss of earnings from the loss of patent for its HIV dolutegravir treatment between 2028 and 2030.

Shares in the FTSE 100 company rose by 4% in UK trading having come into this latest news up around 8% so far in 2026. That’s similar to the FTSE 100 index. Rival AstraZeneca (LSE:AZN) is down by a similar amount year-to-date.

GSK also plans a new flagship £400 million R&D centre in Cambridge, which will house over 1,000 scientists and focus on oncology, respiratory, hepatology, vaccines, and HIV research.

Today’s plans follow the drugmaker's June acquisition of US biotech Nuvalent for $10.6 billion, its biggest in more than a decade, aimed at expanding its cabinet of potential cancer treatments.

Second-quarter currency adjusted sales rose 5% from a year ago to £8.4 billion, driving core earnings up 9% to 50.5 US cents per share. Analysts had forecast earnings of 46.8p.

Sales were led by Specialty Medicines rising 14% to $3.8 billion driven by a near one-fifth increase in respiratory, immunology & inflammation treatments. Vaccine sales improved 8% to £2.3 billion, while demand for General Medicines fell 9% to £2.3 billion.

GSK maintained full-year sales and earnings guidance for growth of up to 5% and 9% respectively, targets feeding into its reiterated goal of achieving sales of more than £40 billion by 2031 versus £32.7 billion a year ago.

A quarterly dividend of 17p per share payable to eligible shareholders on 8 October, remains part of an expected 2026 total of 70p per share. That’s potentially up from 2025’s 64p per share.

A £2 billion share buyback announced with results for 2024 has just completed. Third-quarter results are scheduled for 28 October. 

ii view:

Formed in 2000 via a merger of Glaxo Welcome and SmithKline Beecham, GSK today employs over 65,000 people. Speciality drugs and including those for HIV and cancer generated most sales during 2025 at 41%. That was followed by General Medicines including those for Respiratory conditions at 31%, with Vaccines and including Shingles and Meningitis the balance of 28%.

Geographically, the US made most sales in 2025 at 52%, with Europe coming in at 23%, and the rest of the world the balance of 25%.

For investors, a potential patent loss for its shingles vaccine in 2029 sits alongside the flagged HIV patent loss between 2028 and 2030, with a need to replenish patented and successful medicines. Drug development remains a risky and expensive business. Acquisitions are not without risk, with US government approval for Nuvalent’s therapies not guaranteed, while litigations for drug side effects and government investigations are now common for the pharma industry.  

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To the upside, late-stage pipeline accelerations across 18 indications for seven key assets, and across the areas of oncology, respiratory, hepatology and vaccines, were identified for accelerated investigation, potentially supporting new blockbuster drugs. The acquisition of Nuvalent is expected to prove earnings accretive in 2027, added to its earlier year purchase of food allergy treatment developer RAPT for $2.2 billion. A deal with the US government regarding drug costs and trade tariffs was previously agreed, while developments in AI could reduce costs and speed-up development of potential new drug treatments.  

On balance, and while there is still much to achieve, an confident sales forecast for 2031 and forecast dividend yield above 3% offer grounds for continued investor interest.

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