ii view: GSK injects optimism into 2025 sales forecasts

Second-quarter results to 30 June

• Currency-adjusted revenue up 6% to £7.99 billion
• Currency-adjusted core earnings up 15% to 46.5p per share
• Second-quarter dividend of 16p per share, unchanged from Q1
• Net debt down 1.6% year-over-year to £13.74 billion

Guidance:

• Now expects full-year 2025 revenue growth towards the upper end of 3-5% range
• Expects full-year growth in core earnings of 6-8%
• Expects to pay a total 2025 dividend of 64p per share, up from 61p in 2024

Chief executive Emma Walmsley said: 

"GSK's strong momentum in 2025 continues with another quarter of excellent performance driven mainly by Specialty Medicines, our largest business, with double-digit sales growth in Respiratory, Immunology & Inflammation, Oncology and HIV. 

"We also continue to make very good progress in R&D, with 3 major FDA approvals achieved so far this year, 16 assets now in late-stage development, and 4 more promising medicines to treat cancer, liver disease and HIV expected to enter Phase III and pivotal development by the end of the year. With all this, we now expect to be towards the top end of our financial guidance for 2025 and remain confident in our long-term outlooks."

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ii round-up:

GSK (LSE:GSK) today reported sales and profits that beat City forecasts, with the drug maker now expecting growth in annual sales for 2025 towards the top end of a 3-5% estimate. 

Second-quarter currency-adjusted sales rose 6% year-over-year to £7.99 billion, pushed by a 12% increase in demand for HIV drugs and a 9% gain in vaccine sales. Core earnings rose 15% to 46.5p per share. Analysts had been expecting earnings of 42.4p per share. 

Shares in the FTSE 100 company rose 3% in UK trading having come into these latest results up around 4% so far this year. That’s similar to larger UK headquartered rival AstraZeneca (LSE:AZN). The FTSE 100 index is up 10% year-to-date. 

GSK operates across the three areas of specialty medicines including HIV drugs, general medicines and vaccines.

Specialty sales overall rose 15% to £3.33 billion. Vaccine related sales increased 9% to £2.1 billion, aided by 6% and 22% increases in Shingles and Meningitis related revenues. General medicine sales fell 6% to £2.57 billion. 

GSK flagged five major new product approvals expected in 2025, with progress on 14 key opportunities expected to launch between 2025 and 2031 and with each having per year sales potential of more than £2 billion.

The group’s Blenrep drug to treat multiple myeloma, a type of cancer that forms in plasma cells, has to date received regulatory approval in the EU, Japan, UK, Canada and Switzerland with a decision on approval in the US expected on 23 October. 

Cancer, or oncology sales, which is sits within speciality medicines, rose 42% on a currency-adjusted basis to £484 million from Q2 2024. At the start of 2025 GSK announced US regulatory approval for a drug aimed at treating a rare bone cancer. 

Just days ago, GSK announced a partnership with Chinese pharma company Hengrui to jointly develop up to 12 medicines. The deal could be worth up to $12 billion.

Third-quarter results are scheduled for 29 October. 

ii view:

Formed in 2000 via a merger of Glaxo Wellcome 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 & Co Inc (NYSE:MRK), Johnson & Johnson (NYSE:JNJ) and Pfizer Inc (NYSE:PFE).

For investors, sales at the general medicines division fell 6% year-over-year. Drug development remains a risky and expensive business. The US government has initiated an investigation under to determine the effects on national security of imports of pharmaceutical products raising some uncertainty. 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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More favourably, successful sales of higher profit margin speciality drugs help underpin raised management optimism about the full year. New drug development remains ongoing, with 16 formulas now in late-stage development. A deal to partner China pharma group Hengrui in drug development is not to be overlooked, while reducing costs away from R&D remains a high management focus. 

On balance, and while a new blockbuster drug has not been seen for some time, a consensus analyst estimate of fair value above £16 per share and forecast dividend yield in excess of 4.5% are likely to see investors remain supportive. 

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