GSK beats expectations, shingles vaccine bolsters outlook

© Reuters. GSK (GlaxoSmithKline) logo and rising stock graph are seen in this illustration, August 10, 2022. REUTERS/Dado Ruvic/Illustration

By Maggie Fick and Natalie Grover

(Reuters) - GSK on Wednesday beat fourth-quarter profit and sales forecasts helped by sales of its blockbuster shingles vaccine Shingrix and unveiled an upbeat forecast for 2023.

The positive outlook and strong Q4 results are the latest endorsement of chief executive Emma Walmsey's spin-off last year of consumer business Haleon.

That came after years of underperformance relative to its peers and largely missing out on the lucrative market for COVID-19 vaccines.

On Wednesday, the company reported adjusted fourth quarter profit of 25.8 pence per share on sales of about 7.4 billion pounds ($9.11 billion).

That beat the 21.2 pence per share on sales of about 7.1 billion pounds expected by analysts in a company-compiled consensus.

Shingrix generated 769 million pounds in the quarter ended Dec. 31, topping the 748 million in the GSK-compiled consensus estimates. GSK's turnover was also helped by better-than-expected sales of its HIV and respiratory treatments.

At 0900 GMT, GSK shares were up 0.4% outperforming the FTSE 100 which was up 0.3%.

Having survived a protracted revolt by activist investors Elliott and Bluebell, GSK's prospects were boosted in 2022 by clinical trial success for a potential blockbuster vaccine for respiratory syncytial virus (RSV) - a leading cause of pneumonia in toddlers and the elderly - and M&A activity.

But it has suffered recent setbacks in its oncology portfolio. "The big question is oncology, there’s a lot of skepticism about the return GSK has been getting in investor dollars," said Barclays (LON:BARC) analyst Emily Field.

U.S. litigation over the heartburn drug Zantac has also spooked investors, hurting GSK's shares in the second half of 2022. Some of those fears were abated with a favourable ruling in December, but other lawsuits remain.

PIPELINE CONCERNS

GSK’s potential RSV vaccine was a much needed boost, said Sebastian Skeet, senior analyst from Third Bridge.

"Nevertheless, against the backdrop of recent performance, and without any contribution from Covid-19, GSK’s 2023 guidance demonstrates some improved momentum," he said.

On Wednesday, GSK forecast 2023 adjusted operating profit to climb by 10% to 12% with sales going up 6% to 8%, excluding any contributions from its COVID-19 solutions business at constant exchange rates.

    Some analysts have raised concerns about the company's long-term future, with some of GSK's best-selling HIV drugs set to lose patent protection close to the end of the decade.

    "They don’t really have a pharma asset (outside of HIV) at the moment that holds the business together," UBS analyst Michael Leuchten told Reuters on Tuesday.

"They need to go out and find something, at this point its not clear where they go." 

GSK's shares have lagged most of its rivals in recent years. The stock is down about 20% since January 2020, while rival AstraZeneca (NASDAQ:AZN)'s stock has leapt more than 40% over the same period.

GRAPHIC: GSK and Novartis shares lag (https://fingfx.thomsonreuters.com/gfx/mkt/myvmokorxvr/novartis.PNG)

($1 = 0.8120 pounds)