Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- GSK PLC (GSK, Financial) reported a strong second quarter with sales growing 13% to GBP7.9 billion.
- Core operating profit increased by 21% to GBP2.5 billion, and core earnings per share rose 17% to 43.4p, excluding COVID solutions.
- The company upgraded its full-year guidance, expecting sales growth of 7-9% and core operating profit growth of 11-13%.
- GSK PLC (GSK) continues to invest in its pipeline, with 70 assets in clinical development and positive Phase 3 data for several key treatments.
- The company reported strong performance across all product areas, including vaccines, specialty medicines, and general medicines, with notable growth in the US market.
Negative Points
- The company faced short-term impacts on its vaccines portfolio, particularly in the US market for Shingrix, which saw a 36% decline in sales.
- The ACIP's postponement of recommendations for the 50-59 age group for the Arexvy vaccine could impact sales growth in the near term.
- GSK PLC (GSK) is dealing with ongoing litigation related to Zantac, which continues to be a concern for shareholders.
- The company expects lower positive mix benefits and increased costs to drive future supply chain efficiencies in the second half of the year.
- The impact of the loss of Gardasil royalties is expected to reduce profit growth by 6 percentage points this year.
Q & A Highlights
Q: In light of the vaccine dynamics and recent comments from Pfizer and Merck, can you elaborate on what you're seeing in China and when you realistically expect US Shingrix to return to growth? Also, how are you feeling about the contracting for 2024 US RSV in both retail and non-retail channels?
A: We remain confident in our medium-term outlook for vaccines. In China, we are extremely happy with our partnership with Zhifei, which has expanded vaccination points significantly. For the US, Shingrix will not grow versus last year, but we expect some growth in the second half. The contracting for RSV is on track, and we expect to maintain market leadership with blockbuster-level sales in 2024.
Q: Can you remind us why GSK still has enthusiasm for the TIGIT mechanism in light of disappointing competitor data sets? Is there any differentiation you want to call out on EOS-448?
A: We have seen differentiated data in our GALAXIES-201 platform study, showing a speed and quality of response that is promising. Our GALAXIES-301 Phase 3 study is moving forward with a carefully biomarker-selected population. EOS-448 has a functional Fc region, engaging macrophages, dendritic cells, and natural killer cells, which augments immunity and induces antibody-directed cellular cytotoxicity.
Q: Can you talk about the appetite and contracting discussions for Arexvy, especially in the 75-plus cohort? What are you seeing in the non-retail segment?
A: We are confident in Arexvy's long-term potential. The 75-plus cohort has shown strong immunization rates, and we expect continued momentum. The non-retail segment remains around 85% of the market, and we do not see significant changes there. We plan to return to ACIP with updated data for the 50 to 59 age group.
Q: How much of the downgrade in vaccine guidance is due to Arexvy being lower versus Shingrix? What is your confidence in getting a two-year revaccination interval for Arexvy?
A: The change in guidance is primarily related to RSV due to ACIP's recommendations. We expect to present a comprehensive data package at ACIP in October, which will include information on revaccination. We remain confident in the long-term potential of Arexvy.
Q: Can you help us understand the visibility on second-half demand for Arexvy based on contracting? How does this compare to the flu vaccine market?
A: Unlike flu vaccines, Arexvy does not have guaranteed volumes but has guaranteed percentage splits. We are confident in our market leadership and pricing strategy. The second half will be key, and we expect to see strong demand.
Q: What are your thoughts on the potential mechanism for the lower incidence of dementia observed with Shingrix?
A: There is limited understanding of the exact mechanism, but it may be related to vascular effects or subclinical reactivation of the virus. We are investing in further studies to explore this.
Q: Are you seeing much in the way of emerging domestic competition in China for vaccines? What is the appetite from Zhifei to extend the agreement to Arexvy?
A: There is some local competition, but Shingrix remains highly effective with 18% efficacy for 11 years. Our relationship with Zhifei is strong, and we are discussing extending the partnership to include RSV.
Q: Can you provide more details on the potential for Nucala in COPD and the broader opportunities for IL-5 focused medicines?
A: We expect Nucala to show low to mid-20% efficacy in reducing exacerbations in COPD. The broader opportunity for IL-5 focused medicines is significant, especially with once every six-month dosing for depemokimab. We are well-placed in the COPD arena and continue to explore additional mechanisms.
Q: What are the reasons for not upgrading the HIV guidance despite strong performance?
A: We are tracking towards the top of our guidance and remain confident in our long-acting medicines. The IRA will have a GBP200 million impact next year, but we expect to reach GBP7 billion in 2026. Our long-acting portfolio will be 40% of our total revenue by 2027.
Q: How do you see the potential for Arexvy in ex-US markets, especially with the desire for simplified contracting?
A: We do not see simplified contracting as an obstacle. Our approach is to wait for the full profile of Arexvy, including three-year data, before building the business. We are confident in the long-term potential of Arexvy.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
