It has been about a month since the last earnings report for GSK (GSK Quick QuoteGSK - Free Report) . Shares have added about 10.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Glaxo due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Beats Q2 Earnings & Sales Estimates, Ups 2024 Guidance

GSK reported core earnings of $1.09 per American depositary share (ADS) for second-quarter 2024, beating the Zacks Consensus Estimate of $1.00. Core earnings rose 12% year over year on a reported basis and 13% at a constant exchange rate (CER) driven by higher operating profits and lower finance costs, partly offset by higher non-controlling interest and a higher tax rate.

Quarterly revenues increased 10% on a reported basis and 13% at CER to $9.95 billion (£7.88 billion), beating the Zacks Consensus Estimate of $9.5 billion.

Sales in the United States rose 17%. Sales in Europe rose 3% while that in International markets rose 13% at CER.

All growth rates mentioned below are on a year-on-year basis and at CER.

Quarterly Highlights

GSK reports under three segments: Specialty Medicines, Vaccines and General Medicines. Specialty Medicines, Vaccines and General Medicines are clubbed as commercial operations. 

Specialty Medicines 

Sales in the Specialty Medicines segment rose 22% reflecting successful new launches, Ojjaara, Jemperli and long-acting HIV treatments. 

Sales grew in HIV, Immunology/Respiratory as well as Oncology segments.

HIV sales rose 13%, driven by strong demand and increased market share for oral two-drug regimens, Dovato and Juluca, and long-acting regimens like Cabenuva and Apretude.

GSK generates the majority of its HIV sales from its dolutegravir franchise, comprising three-drug regimens — Triumeq and Tivicay — and two-drug regimens — Dovato and Juluca. The launch of the two-drug regimens has been eroding sales and market share of the three-drug regimens following their launch. 

Sales from its dolutegravir franchise rose 7% in the quarter. While sales of the dolutegravir franchise were up 6% each in the United States and Europe, they rose 13% in International markets.

Sales of Triumeq declined 10%, while Tivicay sales fell 6% during the quarter.

Juluca rose 10% while Dovato was up 30% in the quarter. Rukobia sales rose 44% in the quarter.

New long-acting medicines, Cabenuva and Apretude, contributed £245 million and £72 million, respectively, to revenues compared with £213 million and £54 million, respectively, in the previous quarter. The growth of these products comes from strong patient demand. These two long-acting medicines contributed more than 50% of the total HIV growth.

HIV sales are projected to grow in a low double-digit percentage in 2024 compared to high single digits to low double digits expected previously.

Oncology sales more than doubled during the quarter, driven by strong patient growth for Zejula, Jemperli and Ojjaara. The upside was partially offset by Blenrep for which the company recorded a negative figure of £2 million during the quarter following the drug’s withdrawal from the U.S. market in 2022.

Sales of Zejula rose 44% at CER in the quarter, driven by increased patient demand and higher volumes due to the new tablet formulation as well as new launches in international markets. Jemperli added £108 million to the top line in the second quarter compared with £80 million in first-quarter 2024. The uptick was driven by new patient starts in the United States.

Ojjaara/Omjjara generated £85 million in product sales during the quarter compared with £52 million in first-quarter 2024, driven by strong launch uptake. The FDA approved the drug in September 2023 for treating myelofibrosis patients with anemia, while the drug was approved in the EU in January 2024. GSK has launched the drug in the United Kingdom and Germany.

Respiratory/Immunology and Other sales were up 18% in the first quarter. Sales of the respiratory drug Nucala were up 17% at CER, driven by strong patient demand globally, market expansion and increased biopenetration. Sales of the immuno-inflammation drug, Benlysta, were up 20% in the quarter driven by strong demand and volume growth in U.S., European and International regions. Benlysta sales benefited from biopenetration growth from earlier intervention in SLE and lupus nephritis.

GSK did not generate any sales from Xevudy during the quarter compared with £1 million in first-quarter 2024.

Management expects sales of Specialty Medicines segment to increase in mid-to-high teens percentage at CER in 2024, compared with previously expected low double-digit growth. However, growth in the second half is expected to be lower due to a tough comparison to the year-ago sales.

General Medicines 

Sales of General Medicines were up 12% during the quarter. This upside was driven by solid sales growth of asthma inhaler Trelegy Ellipta across all regions and the increased demand for antibiotics in the International market. The upside was offset by a decline across the Established Respiratory portfolio due to ongoing generic competition globally and the adverse impact of removing the Average Manufacturer Price (AMP) cap on Medicaid drug prices in the United States.

In General Medicines, Respiratory sales rose 18% at CER, while Other General Medicines sales declined 1%.

Trelegy Ellipta sales surged 41% during the quarter, owing to strong growth in all regions. Sales of Anoro Ellipta rose 17%. Key established drug Advair/Seretide sales were down 5%, while sales on Revlar/Breo Ellipta were up 1%. Ventolin sales rose 13%.

In General Medicines, GSK expects sales to increase in a low-to-mid single-digit percentage versus the prior expectation of a decline in a mid-single-digit range in 2024.

Vaccines

GSK’s second-quarter vaccine sales rose 1%, as higher sales of Meningitis vaccines were offset by lower sales of Shingrix. In the quarter, GSK did not record any sales from the COVID-19 booster vaccine co-developed in partnership with Sanofi. Excluding COVID, sales rose 3%.

Arexvy generated £62 million during the quarter. Arexvy maintained around two-thirds of the share of retail vaccinations in the quarter. Demand levels were lower in the second quarter due to seasonality trends.

In 2024, GSK expects the majority of Arexvy sales to come from the U.S. market. Sales are expected to be weighted to the second half in preparation for the 2024/25 RSV season.

Shingrix sales fell 4% during the quarter, as lower sales in the United States offset growth in Europe and International markets. U.S. sales of the vaccine declined 36% in the quarter due to channel inventory reductions and changes in retail vaccine prioritization due to a new Medicare rule, effective from January 2024, that changed how pharmacies process reimbursements from payers. Lower demand due to challenges activating harder-to-reach consumers also hurt U.S. sales. GSK does not expect the short-term headwinds, channel inventory reductions and changes in retail vaccine prioritization to be repeated in the second half of this year.

Presently, Shingrix is available across 45 countries outside the United States and ex U.S. sales represent more than 64% of global sales. 

In Meningitis vaccines, Bexsero sales rose 23%, while sales of Menveo rose 30%. Sales of the influenza vaccine, Fluarix, were down 65%. Sales of Established vaccines were down 2%.

Vaccine sales are expected to grow in a low to mid-single digit percentage versus prior expectation of high single-digit to low double-digit percentage at CER in 2024. For the remainder of the year, management expects lower sales growth in the Vaccines segment. 

Revised recommendations for RSV vaccinations issued in June 2024 by the US Advisory Committee on Immunization Practices (ACIP) are expected to hurt sales of Arexvy. In June, the ACIP recommended the use of Arexvy for all adults aged 75 and over and for adults aged 60-74 who are at increased risk of severe RSV disease. The company also postponed a vote in adults aged 50-59. GSK expects minimal sales of Arexvy in the 50-59 group in 2024 and also sales in the 60-74 group to be affected by ACIP’s recommendation.

Profit Discussion

Adjusted operating profit rose 18% at CER to £2.51 billion, driven by continued leverage from strong sales and favorable product and regional mix, partly offset by higher R&D costs and loss of Gardasil royalties.

Adjusted selling, general and administration (SG&A) costs rose 6% to £2.22 billion on continued investments by the company to support the global market expansion of its marketed drugs.

Adjusted research and development (R&D) expenses rose 9% to £1.42 billion due to continued investment in late-stage pipeline candidates within Vaccines, Respiratory and Infectious Diseases segments.

2024 Guidance

GSK raised its guidance for 2024. The company expects sales to increase 7-9% at CER for the full year compared with the earlier expectation of an increase toward the upper end of the 5-7% range. Improved expectation in Specialty and General Medicines segment is expected to be offset by potential lower sales growth in the Vaccines segment.

Management expects growth in the second half of 2024 to be impacted by the annualization of product launches and stocking impacts, particularly for the company’s Vaccines and oncology products. Sales in the second half of 2023 benefited from newly-launched products like Arexvy and oncology drugs. 

GSK expects core operating profit to grow between 11% and 13% at CER, up from the previously-issued guidance of 9% to 11%. 

Core EPS growth guidance was raised from a range of 8-10% to 10-12% on expectations of higher operating profit and lower net finance costs. Royalty income is expected to be around £600 million in 2024 versus the prior expectation of a range of £550 to £600 million.

The 2024 guidance excludes the impact of COVID-19 solutions.

SG&A is expected to grow at a low single-digit rate in 2024. R&D is expected to increase at a rate slightly below sales growth (previously similar to sales growth). The adjusted tax rate is expected to be around 17%, which is higher than 14% in 2023.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Glaxo has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Glaxo has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Glaxo belongs to the Zacks Medical - Biomedical and Genetics industry. Another stock from the same industry, Incyte (INCY Quick QuoteINCY - Free Report) , has gained 2.3% over the past month. More than a month has passed since the company reported results for the quarter ended June 2024.

Incyte reported revenues of $1.04 billion in the last reported quarter, representing a year-over-year change of +9.3%. EPS of -$1.82 for the same period compares with $0.99 a year ago.

For the current quarter, Incyte is expected to post earnings of $1.35 per share, indicating a change of +22.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -5.5% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Incyte. Also, the stock has a VGM Score of D.