Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

GSK more upbeat on profits and COVID, investors not sure

Published 07/28/2021, 07:14 AM
Updated 07/28/2021, 10:28 AM
© Reuters. FILE PHOTO: A GlaxoSmithKline (GSK) logo is seen at the GSK research centre in Stevenage, Britain November 26, 2019.  REUTERS/Peter Nicholls/File Photo

© Reuters. FILE PHOTO: A GlaxoSmithKline (GSK) logo is seen at the GSK research centre in Stevenage, Britain November 26, 2019. REUTERS/Peter Nicholls/File Photo

By Pushkala Aripaka and Alistair Smout

(Reuters) -GSK forecast 2021 earnings at the better end of its guidance range on Wednesday, buoyed by a recovery in routine visits to doctors and sales of its COVID-19 vaccine booster that helped the drugmaker beat second-quarter profit expectations.

But rising debts, lingering effects of the pandemic and longer-term worries about the British company's drugs pipeline saw its shares hand back initial gains.

Despite being the world's biggest vaccine maker by sales, GSK has fallen behind some rivals in combatting COVID-19, focusing on producing an adjuvant to boost the immune response of others' shots rather than making its own vaccine.

After a project with Sanofi (NASDAQ:SNY) fell short of hopes last year, GSK reported progress in the second quarter, with 258 million pounds ($358 million) in adjuvant sales. The duo's vaccine is now in late-stage trials and they hope for approvals by the end of the year.

GSK and U.S. partner Vir also announced a deal to supply their antibody-based treatment for COVID-19 to the European Union.

The British company, which is spinning off its consumer health arm to focus on improving its pharmaceuticals business with incoming funds, said it was hopeful of the positive momentum running into the second half, pushing full-year earnings towards the better end of its forecast range.

GSK has said it expects adjusted earnings will decline by a mid to high-single digit percentage this year, not including any COVID-related sales.

But some analysts remained concerned about the challenges ahead, with Hargreaves Lansdown (LON:HRGV)'s Nicholas Hyett pointing to "poor levels of cash generation" and rising debt.

And while Citi analysts noted "upside potential" to full-year earnings guidance, they said their focus remained on GSK's pipeline of new drugs.

Pressure to show sustainable growth has mounted on Walmsley after years of underperformance at the pharmaceuticals business. GSK has also locked horns with activist investor Elliott over its future after the planned spin-off next year.

GSK shares, which lost a quarter of their value in 2020, were down about 1% at 1,386.2 pence by 1240 GMT, after initially rising as much as 2% on the results.

A 49% jump in vaccine sales to 1.57 billion pounds and growth in newer medicines helped GSK post adjusted quarterly earnings of 28.1 pence per share, blowing past analysts' estimate of 19.9 pence. Overall sales of 8.1 billion pounds were also ahead of a 7.56-billion-pound consensus https://www.gsk.com/en-gb/investors/analyst-consensus/analyst-consensus.

© Reuters. FILE PHOTO: A GlaxoSmithKline (GSK) logo is seen at the GSK research centre in Stevenage, Britain November 26, 2019.  REUTERS/Peter Nicholls/File Photo

However, GSK forecast revenues from vaccines over the full year would be broadly flat, even as some markets such as the United States open up to routine vaccinations, because COVID-19 inoculation rates are lagging in other parts of the world.

($1 = 0.7208 pounds)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.