GSK forecasts lower 2021 earnings as business split remains on track

Headline results for the fourth quarter:

  • Prescription drug sales: £4.4 billion ($6 billion), down 4%
  • Overall revenue: £8.7 billion ($11.9 billion; forecasts of £8.8 billion), down 2%
  • Profit: £839 million ($1.1 billion), down 45%

Note: All changes are versus the prior-year period unless otherwise stated

What the company said:

CEO Emma Walmsley called 2020 a year of "significant progress" for GlaxoSmithKline, adding "we invested in our pipeline and new launches, readied the company for separation, and had to rapidly mobilise and respond to the pandemic." She said "we delivered our guidance for the year, offsetting the significant impact of COVID-19 on adult vaccinations, with strong performances of new products."

GlaxoSmithKline indicated that it is on track regarding the pending separation of the company into standalone biopharmaceutical and consumer healthcare businesses in 2022. As it works to finalise the split, the drugmaker said it achieved its 2020 target for £300 million ($409 million) in annual cost savings.

The financial results presentation Wednesday coincided with an announcement that GlaxoSmithKline is partnering with CureVac to develop mRNA-based vaccines targeting COVID-19 variants, following some recent setbacks in its pandemic-related efforts with Sanofi and Clover Pharmaceuticals.

Other results:

  • Vaccine sales: £2 billion ($2.7 billion), up 15%, driven by double-digit gains in Shingrix and "strong demand" across all regions for influenza vaccines, while meningitis vaccines also contributed to growth
    • Shingrix: £645 million ($881 million), up 21%, driven by "strong performance" in Europe, specifically demand in Germany, while the launch in China also added to sales
    • Fluarix/FluLaval: £252 million ($344 million), up 83%, reflecting "robust demand" across all regions amid a push by governments for people to get vaccinated against influenza during the COVID-19 pandemic
    • Bexsero: £159 million ($217 million), up 42%, helped by an extended back-to-school season in the US
    • Menveo: £83 million ($113 million), up 26%, also benefiting from an elongated back-to-school season in the US, although this was offset by competitive pressure in international markets
  • HIV product sales: £1.3 billion ($1.8 billion), up 1%, with combined growth from the two-drug regimens Juluca and Dovato, which delivered sales of £280 million ($382 million), "more than offsetting" a decline seen with the triple combination drug Triumeq
    • Triumeq: £580 million ($792 million), down 9%
    • Tivicay: £365 million ($498 million), down 14%
    • Dovato: £141 million ($193 million), more than double the year-ago period
    • Juluca: £139 million ($190 million), up 25%
  • New respiratory product sales: £1 billion ($1.4 billion), up 14%, with Nucala growing 50% in international markets to £45 million ($61 million), while US sales of Trelegy benefited from a new asthma indication launched in the third quarter of last year
    • Ellipta product sales: £725 million ($990 million), up 8%
    • Nucala: £292 million ($399 million), up 34%
  • Benlysta: £205 million ($280 million), up 21%, including a 33% gain for the subcutaneous formulation to £105 million ($143 million)
  • Zejula: £89 million ($122 million), up 35%, with sales of the PARP inhibitor comprising £54 million ($74 million) in the US and £32 million ($44 million) in Europe
  • Established pharmaceuticals sales: £1.8 billion ($2.5 billion), down 19%, hit by lower demand for antibiotics during the pandemic, government mandated changes encouraging the use of generics in markets such as France, Japan and China, and a "strong comparator," including a European Relenza contract
  • Established respiratory product sales: £756 million ($1 billion), down 22%
    • Seretide/Advair: £351 million ($479 million), down 15%, with all regions impacted by generic competition
  • Consumer healthcare sales: £2.4 billion ($3.3 billion), down 8%, with some brands continuing to see "strong demand" as a result of greater consumer focus on health and wellness during the pandemic, while the division also performed well in China
  • Full-year revenue: £34.1 billion ($46.5 billion), up 1 %
  • Full-year profit: £6.4 billion ($8.7 billion), up 21 %

Looking ahead:

GlaxoSmithKline is forecasting a decline this year in the mid- to high-single digits for adjusted earnings per share at constant currencies, largely due to impacts from the COVID-19 pandemic. Pharmaceutical revenue is expected to grow flat to low-single digits, while consumer healthcare sales are anticipated to grow by low- to mid-single digits, in both cases assuming healthcare systems and consumer trends "approach normality" in the second half.

The company also anticipates "further disruption" in the vaccines business in the first half, given governments' prioritisation of COVID-19 vaccination programmes and the pandemic resurgence late last year. "This is expected to impact adult and adolescent immunisations, including Shingrix, notably in the US," GlaxoSmithKline said. Still, the drugmaker said it remains "very confident in demand for these products, and expect strong recovery and contribution to growth from Shingrix" in the second half, while vaccines revenue is projected to grow flat to low-single digits in 2021.

For further analysis, read ViewPoints: GSK cuts guidance, puts on a brave face.

What analysts said:

Hargreaves Lansdown analyst Nicholas Hyett called the quarterly results "a bit of a mess" with disappointing underlying numbers and sales "going backwards." Hyett said "management put that down to a few identified brands that are already earmarked for disposal, but the remaining 'core' products aren't exactly shooting the lights out."

Commenting on the pending business separation, Hyett suggested "the move can't come soon enough." The analyst noted that GlaxoSmithKline "in its current iteration seems to be struggling to set out a clear vision of what it offers investors. Hopefully its successor companies are a little more streamlined."

Pipeline updates:

GlaxoSmithKline disclosed that development of Benlysta in combination with Roche's Rituxan (rituximab) for patients with Sjogren's syndrome was stopped for not meeting efficacy criteria. The company also confirmed that a Phase II study of the depleting anti-LAG antibody GSK2831781 in patients with active ulcerative colitis was terminated "as pre-determined futility criteria were met." Partner Immutep first announced the news last month.

Meanwhile, GlaxoSmithKline said that the OSM antagonist GSK2330811 in systemic sclerosis was removed from Phase I expansion/ Phase II after "meeting the proof of mechanism study’s stop criteria." The drugmaker added that Phase I development of the OX40 agonist GSK3174998 was ended "due to lack of sufficient clinical activity."

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