GSK plc (NYSE:GSK) Q4 2023 Earnings Call Transcript

GSK plc (NYSE:GSK) Q4 2023 Earnings Call Transcript January 31, 2024

GSK plc misses on earnings expectations. Reported EPS is $0.72 EPS, expectations were $0.76. GSK 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. It’s Nick Stone, Head of Investor Relations. Welcome to today’s call and webcast. The presentation was sent to our distribution list by e-mail 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 CR unless stated otherwise. As a reminder following the Consumer Healthcare demerger in 2022, we’re presenting performance and growth at the continuing operations for GSK. Please turn to Slide 3. Today’s call will last approximately one hour with the presentation taking around 30 minutes and the remaining time for your questions. We request that you ask one to two questions so that everyone has a chance to participate. Turning to Slide 4, I will now hand the call over to Emma.

Emma Walmsley: Hello and a warm welcome to everybody joining this call. Today we are updating you on our performance for 2023, giving guidance for 2024, and providing you with new upgraded longer term outlooks. Please turn to the next slide. In 2021, we set out a series of commitments to shareholders, including for a step change in performance following the significant transformation in GSK’s structure, strategy, capital allocation, and culture. Since then, we’ve delivered 10 quarters of consecutive sales growth ex-COVID and our priority to invest in new vaccines and specialty medicines to reshape GSK’s portfolio is now strongly evident with around two-thirds of sales now generated from these two product areas. At the same time, we continue to strengthen our pipeline.

The majority of the late-stage assets that we highlighted in 2021 have moved forward positively. And we’ve added multiple new opportunities to this portfolio including through targeted business development where we’ve secured more than 16 acquisitions and alliances for innovative assets and new technologies. We have achieved all of this whilst maintaining a continued sharp focus on operating margins, cash flow, and capital allocation, mindful of the need to both invest for the future and to deliver attractive returns to shareholders. Next slide please. Our performance for 2023 demonstrates all of this. Sales and profits ex-COVID solutions grew double-digit levels for the year. Sales were up 14% to over £30 billion, a clear highlight being the exceptional launch of Arexvy.

Adjusted operating profit was up 16% and adjusted EPS were up 22%. All three of our product areas demonstrated good growth with sales from new products since 2017 contributing more than £11 billion in 2023. This level of performance helped deliver two upgrades to guidance in 2023 and led to the increased dividend we’ve announced today of £0.58 per share. We also sustained good progress with our trust in the ESG goals, not least reflected in our sector leadership of the S&P’s Global Corporate Sustainability Assessment. Highlights for the year included moving to Phase III for our low-carbon Ventolin inhaler program, hitting our leadership diversity ambitions two years ahead of schedule and extending rollout of our malaria vaccine to 12 new countries in Africa.

Altogether, 2023 provided us with good momentum, which we’re now carrying into this year. Next slide please. In 2024, we expect another year of meaningful growth. Sales growth of 5% to 7%, adjusted operating profit growth of 7% to 10%, and adjusted EPS growth of 6% to 9%. For the period 2021 to 2026, we now expect sales to grow more than 7% on a CAGR basis and adjusted operating profit to increase more than 11% CAGR. For 2026 to 2031 with the progress we’ve made in our portfolio, we now believe that we can deliver more than £38 billion of sales by 2031. This is an increase of £5 billion versus the estimate we gave in 2021 and continues to exclude any contributions from early-stage pipeline assets and further anticipated business development.

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Q&A Session

We’ve also not included any potential future sales contribution from Blenrep here either. So this new outlook represents a marked sales acceleration. As in effect we now expect to reach our original 2031 goal of more than £33 billion by 2026 so five years earlier. Beyond sales, we expect a continued strong focus on margin improvements during this period, while retaining flexibility to invest in growth. Recognizing that we’ll likely face loss of exclusivity for Dolutegravir from 2028 to 2030, we’re also able to say today that we expect operating margins to be broadly stable through that three year period. Julie and I will cover these outlooks in more detail shortly. But first, we’re going to review our 2023 performance and 2024 guidance starting with comments from Luke.

Luke Miels: Thanks, Emma. Please turn to the next slide. 2023 was a great year for operating performance with strong growth across all our product areas and regions up 14% for the full year. Please turn to slide 10. In Vaccines, sales were up 24% for the year with the outstanding launch performance of Arexvy contributing more than £1.2 billion together with the strong performances from Shingrix and our meningitis portfolio. I’ll come to Arexvy in a minute, but first a few points on the rest of the portfolio and specifically prospects for growth. We continue to expect strong growth for Shingrix this year and to deliver more than £4 billion in peak year sales. In the US, our immunization rate is 35% in those people 50 years and older, which means close to 80 million people who are eligible are unvaccinated with more than four million people joining this cohort each year.

We expect 2024 growth to be driven outside the US where the vaccine is now approved in 39 countries most of which have less than 4% penetration and we’re really excited about our new partnership with Zhifei in China. Our meningitis portfolio supports a major public health need and continues to be an important contributor to growth. Bexsero and Menveo sales were up 14% and 12% in 2023. We’re also excited to be submitting our MenABCWY vaccine for approval in the US. this year. Combined this franchise is expected to deliver around £2 billion in non-risk-adjusted peak year sales. Beyond the marketed portfolio, we expect to see further progress in 2024 for our mRNA vaccine with Phase II data and flu, the development of our pneumococcal MAPS vaccine candidates and our potential HSV therapeutic vaccine.

Next slide please. As Emma said, the Arexvy launch has been exceptional and we expect good growth this year mainly driven by further penetration in the US, but also early adoption from the international rollout of the vaccine. We are currently approved in 39 countries. And in the US, our choice to emphasize our 94.6% efficacy in the comorbid population continues to resonate well. Script data shows strong brand preference and market data tells us that two out of three HCPs prefer Arexvy and we continue to have a strong position with all major pharmacies as we start 2024. Looking into this year, we have a major opportunity subject to approval and ACIP recommendation with a potential label for at-risk individuals in the 50- to 59-year-old cohort.

This is around 15 million people. And on other dynamics for this year, we know we’re facing a more competitive environment. And of course, we won’t benefit from launch docking. We’ll also start to see how seasonality affects use patents for Arexvy. But we are ready for all of this, and are ambitious for 2024. We remain very confident this vaccine can achieve more than £3 billion in peak year sales over time. Overall, looking across the vaccine portfolio we expect sales to increase high single-digit to low double-digit percent in 2024 and we’re also upgrading our vaccines outlook from 2021 to 2026 from high single digits to low double digits. Next slide please. Moving to Specialty Medicines. Here, overall sales were up 15% for the year driven by strong performance from key products in HIV, which Deborah will cover shortly respiratory immunology and oncology.

In Respiratory, our market-leading IL-5 Nucala saw strong growth across all geographies and receive severe asthma approval in China. And as we said at our recent respiratory Meet the Management event we expect pivotal COPD data for Nucala in the second half of this year. Before then, and excitingly for this class of respiratory medicines we expect first pivotal trial results for depemokimab our new 6-month IL-5, a key new growth opportunity for our respiratory business. Benlysta was also a major contributor for 2023 with sales up 19% in oncology. We are very pleased with the strong uptake for Ojjaara and we’re also seeing increasing usage of Jemperli and Zejula in patients with endometrial and ovarian cancers driven by generation of compelling data and launch of new patient valued formulations.

A quick word on Blenrep sales decreased for the year as expected but following positive headline results from a planned interim efficacy analysis of the DREAMM-7 trial we are now waiting for further overall survival data from this study and we continue to expect DREAMM-8 results later this year. Overall, we can expect another year of strong performance from our Specialty Medicines in 2024 with growth of low double-digit percent and continue to expect double-digit growth between 2021 and 2026. Please turn to slide 13. Finally our General Medicine portfolio. Sales grew 5% in 2023 and led by Trelegy which is now contributing over £2 million per year and is the world’s top-selling brand in asthma and COPD. We are now using our respiratory expertise across both vaccines and medicines with the benefit of Trelegy and Arexvy co-promotion being recognized by HCPs who want to discuss both respiratory prevention and treatment.