GlaxoSmithKline shares edged towards their best for five years after what analysts said was an impressive first-quarter update, with good performances in a number of areas.
Turnover of £9,780m was 6.9% above consensus forecasts said UBS, adjusted operating profit of £2,613m beat consensus by 10.8% while adjusted EPS of 32.8p were 9.3% better.
Emma Walmsley, chief executive, has been battling Elliott Management and other activist investors over the strategy for the group going forward and especially the fate of Haleon PLC, the consumer healthcare arm that will be demerged in July.
Haleon increased sales by 14% in the quarter, seemingly justifying the rejection of Unilever’s £50bn offer in January.
Indeed, since then shares in the pharma giant have risen 44% and all talk of rebellion seemingly quelled.
“The market’s been hard to impress of late, but GSK managed to eek out some tepid gains after an impressive earnings beat,” said Laura Hoy at Hargreaves Lansdown.
“The end of the pandemic’s been a good thing for GSK as the group’s seen some of the underloved parts of its portfolio start to recover.
“Sales of its shingles vaccine are picking up and the market for antibiotics is starting to recover now that we’re all out and about.
Xevudy, GSK’s Covid monoclonal antibody treatment helped the numbers, but Hoy notes its lower-margin sales mean it will hold ‘New GSK’ profits back by 5-7% in the year ahead.
Sebastian Skeet, senior analyst for healthcare at investment research firm Third Bridge said that even allowing for some favourable tailwinds it was a decent performance.
“Underlying biopharma growth excluding Xevudy was an encouraging +15% as pandemic pressures ease up.
“With a consumer division split-off set for July, GSK’s biggest task is to restore investor confidence in their pipeline, he said.
“All eyes will be on the guidance GSK will issue alongside Q2 results, and how the post-Hal Barron pipeline will tackle the patent cliff edges set for 2028.”
Shingrix’s performance was encouraging, he added, with management seemingly upbeat on its prospects, although recent data points to prescription levels still significantly below pre-pandemic volumes.
“Longer term, mRNA vaccines pose a threat following Pfizer and BioNtech announcing a shingles collaboration earlier in the year.
“GSK’s RSV vaccine for older adults also represents a potentially significant growth driver, especially considering unmet need.”
The worry here, Skeet says, is that Glaxo discontinued its maternal vaccine candidate program with little fanfare in February.
A new blockbuster drug is badly needed and Daprodustat [anaemia] might do it, he adds.
“The two recent rejections for competitors to GSK’s Daprodustat means one of two things; harbinger of bad news or two less competitors?
“Our experts are somewhat more optimistic for GSK’s compound, especially in a subset of patients, although this is by no means a slam dunk.”
Shares rose by 1.9% today to 1788p having hit 1,846p just over two years ago.