GSK plc (NYSE:GSK) Q1 2024 Earnings Call Transcript

GSK plc (NYSE:GSK) Q1 2024 Earnings Call Transcript May 4, 2024

GSK plc isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Nick Stone: Hello everyone. Welcome to today’s call and webcast. The presentation was sent to our distribution list by email, and you can also find it on gsk.com. Please turn to Slide 2. This is the usual safe harbor statement. We will comment on our performance using constant exchange rates or CER unless stated otherwise. As a reminder, adjusted results are now referred to as core, like many European pharmaceutical peers. Please turn to Slide 3. Today’s call will last approximately one hour, with the presentation taking around 25 minutes and the remaining time for your questions. Today, our speakers are Emma Walmsley, Luke Miels, Deborah Waterhouse and Julie Brown, with Tony Wood and David Redfern joining for Q&A. Please ask one to two questions so that everyone has a chance to participate. Turning to Slide 4, I will now hand the call to Emma.

Emma Walmsley: Thanks, Nick, and welcome to everybody joining us today. I’m delighted to be presenting to you all with another set of excellent quarterly results for GSK. Please turn to the next slide. We have had a very strong start to the year. Sales and profits grew double digits for the quarter, with sales up 13% to £7.4 billion, core operating profit up 35% to £2.4 billion, and core earnings per share up 37% to £43.1 all excluding COVID solutions. This excellent performance reflects our continued focus on execution, some benefit from phasing in the quarter, and strong delivery of our recent launches. It also demonstrates the great momentum we continue to see across the business. Demand for our innovative vaccines and specialty medicines was clear, with strong growth across new products.

Our very good sales performance was also underpinned by good cost control. Julie will take you through the details on this in a moment, but I particularly want to highlight our SG&A performance, which was delivered alongside increased investment in R&D demonstrating continued delivery of effective operating leverage and margin improvement. These benefits are also delivering improved cash flow providing funds for investment and returns to shareholders. Our dividend for the quarter was £15. For the full-year, we are upgrading our guidance and looking forward to delivering another year of meaningful growth for shareholders. Next slide, please. Alongside our excellent financial performance, we have seen strong pipeline progress across the therapy areas, with Phase III data readouts for four medicines.

For Gepotidacin, further pivotal data that supports regulatory submission of this new antibiotic. For Cabenuva, further evidence of superior efficacy. For Jemperli, potential broader use of this medicine to treat endometrial cancer. And lastly, encouraging clinical data supporting use of Blenrep for the treatment of multiple myeloma. These data will be presented at ASCO. And we look forward to sharing more with you on our plans for oncology at our ‘Meet the Management’ event in June. These readouts, together with other R&D achievements this quarter, mean we have strengthened growth prospects in all of our key therapeutic areas. Three material points I would highlight. First, we continue to strengthen our innovative Vaccine portfolio this quarter.

With regulatory submission of our new 5-in-1 meningococcal vaccine candidate alongside new expansion opportunities for both Arexvy in the U.S., and Shingrix in China. Second, positive clinical trial findings for an ultra-long-acting formulation of cabotegravir further supporting progression of this medicine, and confidence in the important transition we expect in our HIV portfolio for long-term growth. And third, in Respiratory we completed the acquisition of Aiolos Bio. A signal of our continued investment and leadership in this disease area where a next important step will be sharing data for depemokimab, which we expect in Q2. Next slide, please. Alongside delivering stronger shareholder returns, we continue to build trust by delivering across the six key areas we prioritise for ESG.

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Q&A Session

This quarter, we published our ESG Performance Report. 95% of the metrics we target are being met or exceeded. We also saw the GSK-developed TB vaccine candidate enter Phase 3, sponsored by the Gates MRI and Wellcome Foundation. This could potentially be the first new TB vaccine in over 100 years. So, all in, a very good start to the year. Let’s now hear more from the team on our progress, starting with Luke.

Luke Miels: Thanks, Emma. Please turn to the next slide. In Q1, we delivered growth across all our product areas and regions, with £7.4 billion of sales, up 13% versus last year, excluding COVID solutions. This includes a strong performance in the U.S., led by continued contributions from new launch products. Please turn to Slide 10. In Vaccines, we saw strong growth of 22% in Q1, excluding COVID solutions, led by Arexvy and Shingrix. Following the outstanding launch last year, Arexvy continued to deliver, with sales of £182 million in the quarter. Script data shows a strong brand preference for Arexvy, as we receive two of every three retail prescriptions, with U.S. market penetration of around 14%. I’ll cover Arexvy in more detail on the next slide.

Shingrix delivered a record £945 million in the quarter and was up 18%, driven by public funding outside the U.S. together with early supply to our new partner, Zhifei, in China. Outside the U.S., Shingrix has launched in 39 markets and the majority have less than 5% penetration. In the U.S., sales decreased by 4%, reflecting the comparison to Q1 2023 which benefited from the removal of the co-pay for adults aged 65 and over on Medicare, as well as the prioritisation of other adult vaccines during the viral respiratory season. We are investing in DTC and HCP campaigns as we seek to activate harder-to-reach consumers to continue to grow the cumulative immunisation rate, now at 37% of people aged 50 and older, which leaves more than 75 million Americans still unvaccinated and eligible to receive Shingrix.

Our expectation continues to be that Shingrix sales will reach more than £4 billion over time, driven by growth outside the U.S. In addition, we have also recently shared exceptional data demonstrating vaccine efficacy of 82% at year 11. Turning to our meningitis portfolio, Bexsero and Menveo sales were up 3% and 41%, respectively, in the quarter, with performance in Brazil and favourable phasing driving the growth in Menveo. We’re pleased to have received FDA file acceptance for our MenABCWY vaccine in mid-April, and combined, our meningitis portfolio is expected to deliver around £2 billion in peak-year sales. Across our Vaccines portfolio, we expect sales to increase high-single to low-double digit percent in 2024. Next slide, please.

Focusing on RSV, we vaccinated over 1.3 million people with Arexvy in the retail setting during Q1. The launch was exceptional and exceeded our expectations. We now see seasonality similar to flu, impacting use patterns in the first year. In 2024, we expect the vast majority of sales to be in the U.S. and weighted to the second half in preparation for the 2024/2025 RSV season. This year, we continue to build on our competitive profile with the potential to expand the label, adding at-risk individuals in the 50 to 59 cohort, which could impact approximately 15 million people in the U.S. This is subject to approval, followed by ACIP review in June. Last year we presented data supporting an efficacy profile for Arexvy of at least two seasons. As the 2023/2024 RSV season is coming to an end, later this year, we expect to have additional efficacy data on long-term duration of protection and immunogenicity data over three years.

We plan to present the totality of data at a future public health forum in the second half of this year, and we do not expect public health officials to decide on the frequency of RSV vaccination or revaccination before 2025. We are ambitious about growth in an expanding market with increasing competition. Whether a two-season or three-season vaccine profile, we remain very confident that Arexvy can achieve more than £3 billion in peak year sales over time. Next slide, please. In Speciality Medicines, including HIV, which Deborah will cover shortly, we increased sales by 19%, excluding COVID solutions. In respiratory and immunology, our market-leading medicines, Nucala and Benlysta, continued to deliver good growth. Nucala was up 13% reflecting high patient demand for treatments addressing severe eosinophilic asthma, chronic rhinosinusitis with nasal polyps and EGPA.

Our MATINEE trial to confirm the efficacy of Nucala in COPD is expected to read out in the second half of this year. We also expect pivotal trial results for our six monthly IL-5, depemokimab, this year with readouts in asthma in Q2 and chronic rhinosinusitis with nasal polyps before year-end. Combined, we anticipate our IL-5 portfolio to deliver more than £4 billion in peak-year sales. Benlysta continues to show consistent growth and was up 8% in the quarter, with opportunities to drive earlier intervention and increase penetration in both SLE and lupus nephritis. In oncology, sales more than doubled in the quarter. Ojjaara has continued to perform well following last year’s launch, and I’ll talk more about this on the next slide. We were pleased to receive authorisation from the European Commission for Omjjara in late January, and we’ve since launched in the UK and Germany.

Jemperli has also continued to grow strongly, and again, I’ll discuss this further on the next slide. Zejula’s performance was driven by increased patient demand and higher volumes due to the new tablet formulation, with further growth from new International launches. Overall, we expect strong performance for our Specialty Medicines in 2024 with growth of low-double digit percent. Please turn to Slide 13. Ojjaara, which we acquired from Sierra Oncology, has performed exceptionally well following last year’s launch and has the strongest uptake curve for a JAK inhibitor in myelofibrosis. Ojjaara is establishing market share in both the first-line and second-line settings, and we have seen encouraging data suggesting physicians are anticipating increasing their use of Ojjaara in the coming months.

For Jemperli, we’ve demonstrated strong execution in the quarter with our new patient share up 33%, and we continue to build further clinical evidence in endometrial cancer where we recently presented data demonstrating that Jemperli plus chemotherapy is the only IO combination to show statistically significant and clinically meaningful OS data in the all-comers population. Subsequently, the FDA has granted a priority review to our file to expand treatment with Jemperli to all adult patients with primary advanced or recurrent endometrial cancer. We also expect this data to be published soon in a peer-reviewed journal. On Blenrep, we’re encouraged by the data from DREAMM-7, which showed a tripling of progression-free survival. DREAMM-8 also met its primary end-point and showed a statistically significant and clinically meaningful PFS compared to standard of care in second-line multiple myeloma.