Business Context and Reporting Period
Company: GSK Plc
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: First Quarter (Q1) ended March 31, 2023
Announcement Date: April 26, 2023
GSK reported a strong start to 2023 with momentum across Vaccines, Specialty Medicines, and General Medicines. The results reflect a significant decline in COVID-19 solutions sales compared to the prior year, which included high sales of Xevudy and pandemic vaccines. The Q1 2022 comparative figures have been restated to reflect the July 2022 demerger of the Consumer Healthcare business.
Key Financial Metrics
| Metric | Q1 2023 (£m) | Growth (AER %) | Growth (CER %) |
|---|---|---|---|
| Turnover | 6,951 | (3)% | (8)% |
| Turnover (excl. COVID-19) | 6,819 | 16% | 10% |
| Total Operating Profit | 2,082 | (9)% | (15)% |
| Adjusted Operating Profit | 2,092 | 8% | -% |
| Adjusted Operating Margin | 30.1% | +3.1 ppts | +2.5 ppts |
| Total EPS | 36.8p | (1)% | (8)% |
| Adjusted EPS | 37.0p | 15% | 7% |
| Cash from Operations | 287 | (88)% | N/A |
| Free Cash Flow | (689) | >(100)% | N/A |
| Net Debt | (17,950) | N/A | N/A |
Note: AER = Actual Exchange Rates; CER = Constant Exchange Rates. Negative values in parentheses indicate a decrease or outflow.
Material Changes vs. Prior Period
- Revenue Mix: Total turnover declined 8% at CER, primarily due to a 98% drop in COVID-19 solutions sales (Xevudy and pandemic vaccines). Excluding these, organic sales grew 10% at CER.
- Profitability: Total operating profit fell 15% at CER, impacted by the absence of a £0.9 billion one-off Gilead settlement income received in Q1 2022. Adjusted operating profit remained stable at CER, offsetting a 5% drag from lower COVID-19 sales with a 4% adverse impact from legal provisions (primarily the Zejula royalty dispute).
- Segment Performance:
- Vaccines: Turnover grew 15% at CER, driven by Shingrix and meningitis vaccines.
- Specialty Medicines: Reported turnover fell 33% at CER due to the lack of Xevudy sales. Excluding COVID-19 solutions, the segment grew 13% at CER, led by HIV medicines (Dovato, Cabenuva) and immunology products (Benlysta, Nucala).
- General Medicines: Turnover grew 9% at CER, driven by Trelegy and post-pandemic recovery in antibiotics.
- Cash Flow: Free cash flow turned negative (£0.7 billion outflow) compared to a £1.5 billion inflow in Q1 2022, largely due to the timing of profit share payments and the absence of the Gilead settlement cash receipt.
Guidance, Outlook, and Risks
Full-Year 2023 Guidance (CER, excluding COVID-19 solutions)
- Turnover: Expected to increase 6% to 8%.
- Adjusted Operating Profit: Expected to increase 10% to 12%.
- Adjusted EPS: Expected to increase 12% to 15%.
Management expects turnover growth to be broadly similar in the first and second halves of the year. General Medicines are expected to be broadly flat to slightly down. Adjusted operating profit growth is expected to be lower in the first half and higher in the second half.
Management Commentary & Pipeline
CEO Emma Walmsley highlighted strong performance across all three product areas and confidence in medium-to-long-term growth ambitions. Key pipeline developments include:
- Approvals: US FDA approval for Jesduvroq (anaemia) and full approval for Jemperli (endometrial cancer).
- Positive Data: Phase III readouts for gepotidacin (UTI), MenABCWY vaccine, and Jemperli (endometrial cancer).
- Acquisitions: Proposed acquisition of Bellus Health (camlipixant for chronic cough) and exclusive license for Brexafemme (antifungal).
Risks and Contingencies
- Legal Matters: A judgment was entered against GSK in the Zejula royalty dispute with AstraZeneca on April 5, 2023. GSK will owe back royalties and pay going forward; the company is considering an appeal. Provisions for legal disputes stood at £0.3 billion.
- COVID-19 Impact: GSK does not anticipate significant further COVID-19 pandemic-related sales in 2023. Full-year 2023 turnover growth is expected to be impacted by approximately 9% due to the comparison with 2022.
- Macroeconomic Conditions: Uncertain economic conditions and variability in healthcare system recovery may cause performance fluctuations between quarters.
Investor Verification Checklist
- COVID-19 Normalization: Verify the sustainability of the 10% organic growth rate excluding COVID-19 solutions as the pandemic tailwinds fully dissipate.
- Zejula Royalty Dispute: Monitor the outcome of the appeal and the final determination of back royalties owed to AstraZeneca, which could materially impact future margins.
- Free Cash Flow Conversion: Assess the trajectory of free cash flow recovery given the significant outflow in Q1 2023 compared to the prior year.
- Pipeline Execution: Track regulatory decisions for key assets including the RSV older adult vaccine (US FDA action date May 3, 2023) and momelotinib (US FDA action date June 16, 2023).
- Dividend Policy: Confirm adherence to the 40-60% payout ratio guidance with a declared Q1 dividend of 14p and expected full-year dividend of 56.5p.