Shares of the UK-based GlaxoSmithKline PLC (GB:GSK) fell by 2.07% yesterday despite the company upgrading its full-year guidance after achieving strong sales for HIV and cancer drugs in the second quarter. For 2024, GSK now projects turnover growth between 7% and 9%, up from the previous estimate of 5% to 7%. Meanwhile, its core operating profit growth is expected to be in the range of 11% to 13% compared to the prior outlook of 9% to 11%.
The favourable numbers were overshadowed by concerns over the Zantac litigation and a grim outlook for its Vaccine business, as reflected in the falling share price.
Based in the UK, GlaxoSmithKline is a global pharmaceutical company with a presence in roughly 80 countries.
Insights from GSK’s Results
In the second quarter, GSK reported a turnover of £7.9 billion, marking a 13% increase at constant exchange rates (CER). The higher sales were mainly driven by the Speciality Medicines segment, which saw a jump of 22% at CER in its turnover. Along with this, the growth was supported by a 13% rise in HIV drug sales and solid Oncology sales, which were more than doubled during the quarter. Meanwhile, the company’s core operating profit grew 18% year-on-year to £2.5 billion.
On the flip side, the company’s Vaccine segment underperformed market expectations. Sales of GSK’s shingles vaccine, Shingrix, fell 4% at CER to £832 million. Similarly, its respiratory syncytial virus (RSV) vaccine, Arexvy, reported sales of £62 million, below analysts’ average estimate of £70 million. Looking ahead, the company has reduced its forecast for Vaccine sales growth in 2024 to a low to mid-single-digit percentage from the prior outlook of a high single-digit to a low double-digit percentage.
The overall results were also impacted by huge legal charges to settle the ongoing litigation related to GSK’s medicine, Zantac. Earlier this week, GSK announced that it has reached a settlement with plaintiff Ronald Kimbrow with regard to a Zantac case filed in Illinois state court.
Analysts from Citi and Deutsche Bank believe that the recent developments in Zantac litigation have disappointed investors.
Is it a Good Time to Buy GSK Shares?
According to the consensus on TipRanks, GSK stock has received a Moderate Buy rating. This rating is backed by seven Buy, seven Hold, and two Sell recommendations. The GSK share price forecast is set at 1,835.92p, indicating a projected increase of 21.5% from the current level.
