Coronavirus Update

GlaxoSmithKline Plc - 3rd Quarter Results

This content has been sourced from: https://www.investegate.co.uk/glaxosmithkline-plc/...

GSK delivers resilient performance, strong commercial execution and further strategic progress in Q3

Sales of £8.6 billion -8% AER, -3% CER (Pro-forma -5% CER*)

Total EPS 25.0p, -20% AER, -9% CER; Adjusted EPS 35.6p, -8% AER, +1% CER

 

 

Financial and product highlights

 

·

Reported Group sales £8.6 billion, -8% AER, -3% CER (Pro-forma -5% CER*, -3% CER excluding divestments/brands under review).  Pharmaceuticals £4.2 billion, -7% AER, -3% CER; Vaccines £2.0 billion, -12% AER, -9% CER; Consumer Healthcare £2.4 billion, -4% AER, +2% CER (Pro-forma -6% CER*).  Strong performance from key growth drivers in respiratory, HIV, oncology and Consumer Healthcare partly offset by expected disruption from COVID-19

·

Sales of new and specialty pharmaceuticals (excluding established products) £2.5 billion, +8% AER, +12% CER

·

Respiratory sales £978 million, +21% AER, +26% CER.  Trelegy sales £194 million +40% AER, +45% CER.  Nucala sales £251 million, +24% AER, +29% CER

·

HIV sales £1.2 billion, -4% AER, flat at CER; two-drug regimen sales £222 million, +87% AER, +94% CER

·

Oncology sales £99 million, +55% AER, +58% CER

·

Shingrix sales £374 million, -30% AER, -25% CER.  US prescriptions rates returned to 2019 levels by quarter-end

·

Total Group operating margin 21.5%.  Adjusted Group operating margin 30.8%.  SG&A decline reflecting ongoing and active focus on cost management.  R&D costs down in quarter; expect 2020 full year R&D costs to rise mid-to-high single digits as we continue to invest in late-stage pipeline

·

Total EPS 25.0p, -20% AER, -9% CER reflecting adverse changes on contingent consideration liabilities offset by asset disposals and improved operating performance

·

Adjusted EPS 35.6p, -8% AER, +1% CER reflecting operating profit growth partly offset by higher effective tax rate and non-controlling interest allocation of Consumer Healthcare profits

·

Q3 net cash flow from operations £0.9 billion.  Free cash flow £(0.2) billion

·

19p dividend declared for the quarter

 

Guidance

·

On track to deliver full year 2020 Adjusted EPS at the lower end of the -1% to -4% range at CER

 

 

Pipeline highlights

·

Continued progress in biopharma pipeline with 3 approvals since Q2 results:  FDA and EC approval of Blenrep as first anti-BCMA therapy for multiple myeloma; FDA approval of Trelegy for asthma; FDA approval of Nucala as first biologic treatment for Hypereosinophilic Syndrome (HES)

·

Positive European CHMP opinions in HIV for cabotegravir and rilpivirine as long-acting regimen for HIV treatment and for Zejula as first-line monotherapy maintenance treatment in ovarian cancer

·

Phase III trials to start in Q4 and Q1 2021 for RSV vaccines in maternal and older adults following positive Phase I/II data

·

First participant vaccinated in Phase III clinical trial of 5-in-1 meningitis ABCWY vaccine candidate

 

COVID-19 Solutions update

·

Phase I/II study of Sanofi-GSK adjuvanted recombinant protein-based vaccine candidate initiated.  Phase III trial expected to start December 2020

·

Supply agreements reached with US, EU, UK, Canada for Sanofi-GSK vaccine.  Statement of Intent signed with COVAX facility to support successful and equitable access to COVID-19 vaccines worldwide

·

Phase III study underway for Vir-GSK antibody (VIR-7831) for high-risk outpatients with COVID-19, with initial results potentially available by the end of 2020

 

 

Q3 2020 results

 

Q3 2020

 

Growth

 

9 months 2020

 

Growth

 

£m

 

£%

 

CER%

 

£m

 

£%

 

CER%

 

 

 

 

 

 

 

 

 

 

 

 

Turnover

8,646 

 

(8)

 

(3)

 

25,360 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating profit

1,858 

 

(13)

 

(2)

 

6,722 

 

33 

 

37 

Total earnings per share

25.0p

 

(20)

 

(9)

 

102.0p

 

51 

 

55 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating profit

2,665 

 

(4)

 

 

7,089 

 

 

Adjusted earnings per share

35.6p

 

(8)

 

 

92.6p

 

(7)

 

(4)

 

 

 

 

 

 

 

 

 

 

 

 

Net cash from operating activities

861 

 

(66)

 

 

 

4,586 

 

 

 

Free cash flow

(180)

 

>(100)

 

 

 

2,300 

 

(7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Total results are presented under 'Financial performance' on pages 12 and 27 and Adjusted results reconciliations are presented on pages 23, 24, 38 and 39.  Adjusted results are a non-IFRS measure that may be considered in addition to, but not as a substitute for, or superior to, information presented in accordance with IFRS.  Adjusted results are defined on page 10 and £% or AER% growth, CER% growth, free cash flow and other non-IFRS measures are defined on page 62.  GSK provides guidance on an Adjusted results basis only, for the reasons set out on page 11.  All expectations, guidance and targets regarding future performance and dividend payments should be read together with 'Outlook, assumptions and cautionary statements' on pages 63 and 64.

*

Reported AER and CER growth rates include one and seven months' results of former Pfizer consumer healthcare business.  Pro-forma CER growth rates are calculated as if the equivalent one and seven months of Pfizer consumer healthcare business results, as reported by Pfizer, were included in the comparative period of Q3 2019 and 9 months 2019 respectively.  See 'Pro-forma growth' on page 11.

 

 

Emma Walmsley, Chief Executive Officer, GSK said:

"GSK has responded well to a challenging operating environment this year with disciplined cost control and strong commercial momentum in key growth products including Nucala, Trelegy, Benlysta, 2 drug-HIV regimens, Zejula, Shingrix and our priority Consumer Healthcare brands.  This, combined with improving vaccination rates this quarter, means we are on track to deliver within our earnings guidance range for 2020.  In addition, we continue to make good progress on our preparations to separate the Group and create two new companies - in Biopharma and Consumer Health - which we believe will deliver options for sustainable growth and returns to shareholders.

 

"R&D delivery has continued with three product approvals since Q2 results and presentation of new clinical data to support the start of Phase III development for our very promising RSV vaccines.  We are also urgently advancing possible COVID-19 Solutions with our partners, including clinical trials for antibody therapy VIR-7831 and three different adjuvanted vaccines.  We expect to see data on all of these before the end of the year."

 

2020 guidance

At full-year 2019 results on 5 February 2020 we provided guidance with respect to expected full-year 2020 Adjusted EPS, being a decline in the range of -1% to -4% at CER.  This guidance reflected our expectations for growth in key new products, and the start of a two-year period in which we would continue to increase investment in these products and in our R&D pipeline, alongside implementation of our new programme which will prepare the Group for separation.

 

Our 2020 guidance was set before the COVID-19 pandemic and did not include any potential impact on our business from the pandemic.  It also excluded any impact in 2020 from further material divestments beyond those previously announced.

 

The COVID-19 pandemic has impacted Group performance, particularly in the Vaccines business, during the first nine months of 2020.  During the third quarter we have seen a recovery in vaccination rates, including adult immunisation rates in the United States returning to prior year levels in the last month of the quarter.

 

This improvement, coupled with strong commercial execution of key growth products and disciplined cost control, mean we are on track to deliver within our earnings guidance range, with 2020 Adjusted EPS now expected to be at the lower end of the -1% to -4% range at CER.  Achieving this guidance is supported by the expectation of sustained recovery of adult immunisation rates, particularly in Shingrix.

 

All expectations, guidance and targets regarding future performance and dividend payments should be read together with 'Outlook, assumptions and cautionary statements' on pages 63 and 64.  If exchange rates were to hold at the closing rates on 30 September 2020 ($1.28/£1, €1.10/£1 and Yen 136/£1) for the rest of 2020, the estimated impact on 2020 Sterling turnover growth would be negative at around 1% and if exchange gains or losses were recognised at the same level as in 2019, the estimated negative impact on 2020 Sterling Adjusted EPS growth would be around 2%.