ii view: GSK boss seeks to leave on a high as forecasts raised

CEO Emma Walmsley at the 10th Annual Breakthrough Prize, dubbed the ‘Oscars of Science’, in Los Angeles. Photo: Craig T Fruchtman/Getty Images.

Third-quarter results to 30 September

• Currency adjusted revenue up 8% to £8.5 billion
• Currency adjusted core earnings up 14% to 55p per share
• Third-quarter dividend of 16p per share, unchanged from Q2
• Net debt up 12% year-over-year to £14.4 billion

Guidance:

• Now expects full-year 2025 revenue growth of 6-7%, up from a previous 3-5%
• Now expects full-year growth in core earnings of between 9% and 12%, up from a previous 6-8%
• Continues to expect a to pay a total 2025 dividend of 64p per share, up from 61p in 2024

Chief executive Emma Walmsley said: 

"GSK's momentum continues with another quarter of strong performance, supporting upgraded guidance for 2025, and positioning us well for 2026 and achieving our longer-term growth outlooks. 

“Sales grew in all areas. We have also continued to make very good progress in R&D with four FDA product approvals so far this year.”

"This is my final quarter reporting as CEO, and so I would like to thank everyone who has contributed to the transformation of GSK in the last nine years.”

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ii round-up:

Drug maker GSK (LSE:GSK) today increased estimates for annual sales and profit as chief executive Emma Walmsley prepares to pass the baton to commercial director Luke Miels who takes her job in 2026. 

Forecast-beating sales of HIV treatments, a cancer drug, and vaccines to prevent a respiratory condition and shingles drove third-quarter currency-adjusted revenues up 8% to £8.5 billion. Core earnings climbed 14% to 55p per share, beating City estimates. Management upgrades to full-year sales and profit forecasts persuaded analysts to raise their own estimates by between 1% and 2%.  

Shares in the FTSE 100 company rose 4% in UK trading having come into these latest results up by close to a quarter so far in 2025. That’s ahead of a near one-fifth gain for both rival AstraZeneca (LSE:AZN) and the FTSE 100 index year-to-date. 

GSK operates across the three areas of specialty and general medicines, as well as vaccines. 

Sales of specialty drugs, including HIV and cancer treatments, rose 16% to £3.4 billion during the period. General medicine sales improved 4% to £2.5 billion. Vaccine related revenues rose 2% to £2.7 billion. 

GSK hopes that new drugs to treat conditions including asthma and COPD (chronic obstructive pulmonary disease) will help push annual sales up to £40 billion by 2031 compared with £31.4 billion in 2024.

The pharma giant, with research labs in Stevenage, Hertfordshire, highlights 15 developing drug opportunities expected to launch before 2031 with potential sales of over £2 billion per year.   

Luke Miels, who takes charge of GSK on 1 January, joined the company in 2017 having previously worked at AstraZeneca, Roche Holding AG (SIX:ROG) and Sanofi-Aventis.  

Full-year results are scheduled for 4 February. 

ii view:

Formed in 2000 via a merger of Glaxo Welcome and SmithKline Beecham, GSK today employs over 65,000 people. Geographically, the US accounted for most sales in 2024 at 52%, followed by the rest of the world at 46% and the UK at 2%. A constituent of the FTSE 100 index, global competitors include Merck, J&J and Pfizer.

For investors, potential changes in US trade tariffs could impact sales and profits. Drug development remains a risky and expensive business. A forecast price/earnings (PE) ratio in line with the three-year average may suggest the shares are not obviously cheap. Significant overseas sales provide room for currency headwinds, while litigation for drug side effects and government investigations are now common for the pharma industry.   

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To the upside, successful sales of higher profit margin speciality drugs help underpin management optimism. New drug development remains ongoing with 15 formulas highlighted as offering significant sales potential. A previous deal to partner Chinese pharma group Hengrui in drug development is not to be forgotten, while reducing costs away from R&D remains a high management focus.  

In all, and while new blockbuster drug development is far from guaranteed, an ongoing £2 billion share buyback programme and forecast dividend yield of over 3.5% are rewarding investors to stick with GSK. It might also be worth watching price movements in the weeks and months ahead. GSK shares have traded between £12 and £18 for most of the past 14 years, peaking at 1,875p in 2020. It will be interesting to see what happens when it reaches these kind of levels again - whether it sticks within this trading range or manages a break to the upside.    

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:

Hold