Glaxo’s (GSK) Q1 Earnings Top, Xevudy Adds $1.7B in Sales

GlaxoSmithKline plc GSK reported first-quarter 2022 earnings of 88 cents per American depositary share (“ADS”), beating the Zacks Consensus Estimate of 77 cents. Adjusted earnings were up 43% year over year on a reported basis as well as at a constant exchange rate (“CER”).

Quarterly revenues increased 32% on a reported basis as well as at CER to $13.1 billion (£9.78 billion), beating the Zacks Consensus Estimate of $11.97 billion. The growth was driven by a rise in sales across all categories along with additional sales from its COVID-19 antibody drug, Xevudy. The first-quarter sales indicate a strong recovery from the unfavorable impact of the COVID-19 pandemic during the year-ago quarter.

From the first quarter of 2022, Glaxo started reporting financial figures under three segments: Specialty Medicines, Vaccines, General Medicines and Consumer Healthcare.

Specialty Medicines, Vaccines and General Medicines are clubbed as commercial operations. The Specialty Medicines and General Medicines were part of the erstwhile Pharmaceutical segment. The Consumer Healthcare segment is expected to be demerged in July 2022. The segments under commercial operations will constitute the new BioPharma business following the demerger.

Shares of Glaxo have gained 0.7% so far this year compared with the industry’s 4.4% increase.

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BioPharma Business Remains Strong

The reclassified BioPharma business includes all medicines and vaccines, including Xevudy, in Glaxo’s portfolio. Sales were up across all segments under the BioPharma business, especially Specialty Medicines and Vaccines.

Sales of the BioPharma business were up 40% at CER, mainly driven by Xevudy. Excluding sales from Xevudy, total BioPharma sales were up 15% at CER.

Sales in the United States were up 57%. Sales in European and International markets gained 36% and 20%, respectively, at CER.

Sales of the Specialty Medicines segment were up 97% at CER due to Xevudy. Revenues from the Specialty Medicines segment were up 14% at CER, excluding Xevudy sales. Sales growth of HIV, oncology and respiratory drugs were strong.

Xevudy generated sales of £1.31 billion ($1.75 billion) during the first quarter, compared with £828 million in the fourth quarter. Xevudy sales contributed 25% to the Pharmaceuticals sales growth. However, the drug hurt adjusted margins due to its higher cost of sales.

Glaxo developed Xevudy in collaboration with Vir Biotechnology VIR. The monoclonal antibody treatment from Glaxo and Vir was granted emergency use authorization for patients at the risk of hospitalization in the United States in May 2021. The Vir-partnered drug received conditional marketing authorization in Europe in December 2021.

Sales of the respiratory drug, Nucala were up 16% at CER during the quarter driven by growth in all markets.

HIV sales increased 15% year over year on a reported basis and up 14% at CER. Sales growth of new HIV drugs — Juluca, Dovato, Cabenuva, Rukobia and Arpetude — and phasing were partially offset by weaker sales of Triumeq. Please note that Glaxo markets Juluca in collaboration with J&J J.N.J.

Glaxo generates the majority of its HIV sales from its dolutegravir franchise, comprising three-drug regimens — Triumeq and Tivicay — and two-drug regimens — Dovato and J&J-partnered Juluca. The launch of the two-drug regimens has been eroding sales and market share of the three-drug regimens following their launch. During the first quarter, Glaxo and J&J’s Juluca and Dovato generated 33% of total HIV sales, up from 24.5% in the year-ago quarter. The company added a single-drug regimen — Rukobia — and the long-acting drug — Cabenuva — to its HIV franchise in 2020 and 2021, respectively. The company launched the first injectable treatment for HIV pre-exposure prevention, Apretude, approved in December last year.

Sales of the dolutegravir franchise were up 8% at CER in the US market and 6% in Europe. In International markets, sales were up 34% at CER.

Sales of Triumeq declined 11% at CER, while Tivicay sales gained 7%. The combined sales of Dovato and J&J-partnered Juluca gained 53% at CER. Sales of Rukobia, Cabenuva and Apretude also contributed to growth.

Sales of the immuno-inflammation drug, Benlysta were up 18% in the quarter, reflecting growth across all regions.

Oncology sales were up 15% year over year, mainly driven by Zejula. Sales of Zejula rose 11% in the quarter. Sales of the drug, Blenrep, gained 19% during the quarter. The recently-launched Jimperli added £4 million to the top line in the first quarter.

Sales of General Medicines, which includes the Established Pharmaceuticals portfolio, were up 3%. Following its reclassification of the portfolio, Glaxo added Trelegy Ellipta and Anoro Ellipta to the General Medicines segment. Loss of sales from established drugs due to generic competition was offset by the strong sales growth of Trelegy Ellipta. A few established drugs like Flixotide, Relvar Ellipta and Ventolin also demonstrated sales growth.

Trelegy Ellipta sales surged 35% year over year, driven by strong growth in all regions. Sales of Anoro Ellipta decreased 15% at CER during the first quarter. Key established drugs Advair/Seretide sales declined 14% year over year due to generic competition in all markets. Sales on Anoro Ellipta declined 15% at CER year over year.

Vaccine Sales Gains

Glaxo’s first-quarter vaccine sales gained 36% at CER, mainly driven by the recovery in Shingrix sales.

Shingrix sales more than doubled at CER during the quarter due to strong demand in the United States and Germany along with additional sales from launches in new countries.

In Meningitis vaccines, Bexsero sales increased 23% while sales of Menveo were up 5%. Sales of the influenza vaccine, Fluarix were flat. Sales of Established vaccines were up 8% year over year.

Consumer Healthcare Sales Up

Sales in the Consumer Healthcare segment increased 14% at CER. Excluding sales of brands divested or under review for divestment, sales were up 16%.

Glaxo’s Consumer Healthcare business is a joint venture (“JV”) with Pfizer PFE and Shinogi. Pfizer and Glaxo created the world’s largest consumer healthcare business by merging their consumer businesses in 2019.

Glaxo remains on track to demerge the JV with Pfizer and Shinogi from its other businesses in July 2022.

Sales of Pain relief and Oral health categories increased 17% and 9%, respectively, in the quarter. Sales of Vitamins, minerals and supplements category were up 15% in the first quarter. Sales of Respiratory health gained 53%. Digestive health and other category sales were down 1%.

Operating Expenses

Selling, general and administration (SG&A) cost increased 15.8% year over year at CER to £2.7 billion. The increase in SG&A costs was led by the launch of products in the Pharmaceuticals and Vaccines segments.

Research and development (R&D) expenses rose 7.1% at CER to reach £1.15 billion.

2022 Guidance

Glaxo reiterated its previous guidance for 2022. The company only provided an outlook for the new BioPharma business, which will be formed after the demerger of the Consumer Healthcare business.

The company expects sales of the new Glaxo to increase 5% to 7% in 2022. The guidance excludes any revenues from its COVID-related products.

Glaxo expects sales of specialty drugs to increase 10% at CER in 2022, while vaccine sales are expected to grow in low-teens percentage points. The company expects strong double-digit growth for Shingrix in 2022.

GlaxoSmithKline plc Price, Consensus and EPS Surprise

GlaxoSmithKline plc Price, Consensus and EPS Surprise

GlaxoSmithKline plc price-consensus-eps-surprise-chart | GlaxoSmithKline plc Quote

Zacks Rank

Glaxo currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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