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GSK's Key Drugs to Drive Sales in a Sluggish Second Half

GSK’s GSK relatively newer specialty products like Nucala (severe eosinophilic asthma), Bexsero (meningitis vaccine), Shingrix (shingles vaccines), Trelegy Ellipta (three medicines in a single inhaler to treat COPD) and Juluca (dolutegravir+ rilpivirine once-daily, single pill for HIV) have witnessed considerable success and have become key drivers of top-line growth. Sales of these products are making up for a decline in Established Pharmaceuticals due to generic erosion.  GSK expects its new medicines and vaccines (approved between 2017 and 2021) to contribute around 60% of the new GSK’s (after CHC demerger) sales growth for the period 2022-2026.

GSK has made significant progress in its pipeline. Promising candidates in late-stage development include momelotinib (myelofibrosis), otilimab (rheumatoid arthritis), gepotidacin (uncomplicated urinary tract infection and urogenital gonorrhoea), bepirovirsen (chronic hepatitis B), depemokimab (severe eosinophilic asthma, eosinophilic granulomatosis with polyangiitis, hypereosinophilic syndrome and chronic rhinosinusitis with nasal polyps) and RSV vaccines for older adults.

Key new drug approvals in the past couple of years were Rukobia/fostemsavir for heavily pre-treated HIV, Blenrep/belantamab mafatotin for fourth-line multiple myeloma; Cabenuva, a long-acting injectable HIV treatment; Jemperli (dostarlimab) for second-line endometrial cancer and mismatch repair-deficient (dMMR) recurrent or advanced solid tumors and Apretude, a long-acting injectable form of cabotegravir drug for the prevention of HIV infection, also called pre-exposure prophylaxis or PrEP. These new products should contribute meaningfully to revenue growth in coming years.

In 2020/2021, GSK established multiple partnerships to develop COVID-19 solutions, including with Sanofi, Medicago, SK Biosciences to make adjuvanted COVID-19 vaccine and with Vir Biotechnology VIR for therapeutic antibody treatments like Xevudy (sotrovimab). GSK/Vir Biotechnology’s Xevudy was authorized in the United States in May 2021 and Europe in December 2021. Xevudy generated sales of almost £1.78 billion for GSK in the first half of 2022. GSK is also increasing investment in the mRNA platform.

Several new drug/line extension approvals are expected in the near future, which should boost sales. GSK plans to launch more than 20 new products/line extensions by 2026, with more than 10 having blockbuster potential.

In July, GSK completed the spin-off of its Consumer Healthcare segment into a new standalone company called Haleon HLN. GSK’’s Consumer Healthcare segment was a joint venture with Pfizer PFE formed by the merger of their respective Consumer Healthcare units in 2019. GSK shareholders own 54.5% stake in Haleon, while 6% is held by GSK. Pfizer holds a 32% stake in Haleon and plans to sell this stake soon. The spin-off of the Consumer unit has allowed GSK to focus on its drug development.

GSK’s vaccine sales recovered in 2022 after being hurt by COVID-related disruptions in several marketsin 2021.In 2022, the company expects vaccine sales to grow at low to mid-teens percentage points (previously low-teens percentage points), excluding pandemic solutions.

For its shingles vaccine, Shingrix, GSK expects double-digit growth to be driven by strong demand in existing markets and geographical expansion.

GSK has its share of problems. While GSK’s first-half performance was better than expected and ahead of the full-year guidance, it expects lower reported growth in the second half. Compared with the first half of the year, GSK expects to record slightly lower sales in the second half of 2022 due to some channel stocking in the United States during the first half of 2022. With regard to its COVID-19 solutions, GSK expects sales to be substantially lower in the second half. GSK said that the majority of expected COVID-19 solutions sales for 2022 were achieved in the first half of 2022.

Generic competition for key drug, Advair is hampering sales of GSK’s respiratory products, which we believe may not be compensated by new respiratory drugs. Competitive pressure on HIV drugs has risen.

Nonetheless, strong sales of specialty medicines, regular pipeline success and accretive M&A deals should keep the stock afloat, going forward.

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