GSK

Business Context and Reporting Period

Company: GSK plc
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: First Quarter (Q1) ended 31 March 2024
Announcement Date: 1 May 2024

GSK reported a strong start to 2024 with broad-based performance driving sales, profits, and earnings growth. The company updated its full-year 2024 guidance upwards, citing momentum across Vaccines and Specialty Medicines, particularly from new launches like Arexvy and Ojjaara, and strong performance from Trelegy.

Key Financial Metrics (Q1 2024)

Note: AER = Actual Exchange Rates; CER = Constant Exchange Rates. Core results exclude adjusting items such as contingent consideration remeasurement and major restructuring costs.

Material Changes vs. Prior Period

• Revenue Growth: Total sales grew 10% at CER, driven by Vaccines (+16% CER) and Specialty Medicines (+17% CER). General Medicines grew 1% at CER, supported by Trelegy (+33% CER), offset by declines in established respiratory products due to US Medicaid pricing changes.
• Profitability Divergence: Total Operating Profit declined 18% at CER due to a £685 million charge for the remeasurement of contingent consideration liabilities (CCL) related to ViiV Healthcare and Pfizer put options. Conversely, Core Operating Profit grew 27% at CER, reflecting strong sales leverage and a reversal of a legal provision for the Zejula royalty dispute.
• Product Performance:
  • Vaccines: Shingrix sales rose 18% (CER) driven by international funding; Arexvy generated £182 million in its first full quarter.
  • HIV: Sales grew 14% (CER), led by long-acting medicines (Cabenuva +73% CER) and oral 2DR regimens (Dovato +27% CER).
  • Oncology: Sales grew over 100% (CER) due to Jemperli and Ojjaara launches.
• Acquisition: Completed the acquisition of Aiolos Bio for approximately £800 million to expand the respiratory biologics pipeline.

Guidance, Outlook, and Risks

Updated 2024 Guidance (at CER, ex COVID)

• Turnover Growth: Upgraded to the upper part of the 5% to 7% range.
• Core Operating Profit Growth: Upgraded to 9% to 11% (previously 7% to 10%).
• Core EPS Growth: Upgraded to 8% to 10% (previously 6% to 9%).

Management Commentary

CEO Emma Walmsley highlighted a "strong start" with positive Phase III readouts for four medicines (gepotidacin, Cabenuva, Jemperli, Blenrep). The company expects first-half 2024 sales growth to be higher than the second half due to the launch dynamics of Arexvy in H2 2023.

Risks and Contingencies

• Legal Proceedings: Significant Zantac litigation continues with trial dates set in Illinois and California. GSK settled one case (Boyd/Steenvoord) confidentially but denies liability. Aggregate provision for legal disputes is £312 million.
• Contingent Consideration: Volatility in CCL remeasurement significantly impacts Total results but is excluded from Core guidance.
• Exchange Rates: A strengthening Sterling could negatively impact reported growth. If rates hold at Q1 2024 closing levels, estimated impact on 2024 turnover growth is -3%.
• COVID-19 Solutions: No further pandemic-related sales are anticipated for 2024, creating a negative growth impact of 1-2 percentage points compared to 2023.

Investor Verification Checklist

• Core vs. Total Results: Verify the distinction between Core results (management's primary metric) and Total results (IFRS), specifically the £685 million CCL charge impacting Total EPS.
• Guidance Assumptions: Confirm that 2024 guidance excludes COVID-19 solutions and assumes no material litigation costs beyond current provisions.
• Product Mix Shift: Assess the sustainability of growth in Vaccines (Shingrix, Arexvy) and Specialty Medicines (HIV, Oncology) versus the decline in General Medicines due to US pricing pressures.
• Legal Exposure: Monitor upcoming Zantac trial dates (July 2024 in Illinois) and potential liability outcomes.
• Dividend Policy: Note the declared Q1 dividend of 15p and the expectation of a 60p full-year dividend, consistent with a 40-60% payout ratio.