GSK earnings miss on vaccine drag

GSK shares fell 3.8% on Wednesday after the company reported a 19% drop in pre-tax profit for the third quarter. The decline came despite core operating profit rising 5% and earnings per share growing 1%, both figures that exceeded analyst forecasts. The market reaction was driven primarily by weaker sales in the vaccine division and newer drug launches.

The British pharmaceutical firm, which ranks as the second-largest in the UK, posted pre-tax profits of £1.9bn for the period from July to September. This figure included £318m in restructuring charges, with additional costs expected later in the year. Total turnover for the quarter reached £8.9bn, a 5% increase from the same period last year. This growth was fueled by strong performance in HIV, cancer, and lupus treatments.

Vaccine sales, however, slipped 2% to £2.6bn. Sales of Shingrix, the shingles vaccine, dropped 5%. Arexvy, the respiratory syncytial virus vaccine, saw a steeper 24% decline, partly due to difficult year-over-year comparisons. In contrast, meningitis vaccine sales rose 12%. Sales of Exdensur, a recently launched asthma medication, also fell short of analyst expectations.

Luke Miels, who became chief executive in January succeeding Emma Walmsley, defended the performance of Arexvy. He noted that GSK maintains market share leadership against rival Pfizer and is receiving good orders outside the United States. Miels stated that the company needs to observe the next couple of months to understand the full picture of demand.

Investors remain focused on the upcoming loss of patent protection for dolutegravir, a blockbuster HIV drug. This event is expected to occur toward the end of the decade, allowing competitors to sell cheaper generic versions. GSK has set a target of more than £40bn in annual revenue by 2031 as it rebuilds its cancer business.

The company is executing a cost-saving program aimed at simplifying operations and redirecting funds to research and development. The restructuring will cost £2.4bn, with most of the expense incurred this year and next. Miels said the company is slightly ahead of its three-year plan to save £1.9bn annually. He noted that the impact on the UK would be limited, affecting support roles in London, Poland, and India.

GSK is also reorganizing its vaccine operations in Belgium. The shift toward digital tools and automation is expected to result in approximately 1,200 job losses, although the country will continue to produce the bulk of the company's vaccines. The firm employed nearly 67,000 people worldwide at the end of last year.

The company maintained its annual forecasts, with research and development spending set to grow faster than sales. GSK expects to initiate 22 late-stage studies of new medicines by the end of the year. Miels described Shingrix as a remarkable product with potential for growth next year. Two large studies are currently examining whether the vaccine reduces the risk of dementia and major cardiovascular events, with data due in 2029 and 2027 respectively.