GSK Plc annual report, Q4 FY2023

Business context and reporting period

GSK plc’s Form 20-F is an audited annual report for the fiscal year ended December 31, 2023, filed March 5, 2024. GSK is a global biopharmaceutical company focused on vaccines, specialty medicines and general medicines. The figures below are annual, not Q4-only. Financial statements are prepared under IFRS as issued by the IASB.

Financial performance and position

Gross profit margin improved to 71.8% from 67.4%, mainly reflecting the lower contribution from lower-margin COVID-19 products and better product mix. Total net finance costs were £677m, down from £803m. The effective tax rate was 12.5%; the adjusted tax rate was 15.5%.

Sales by product group: Vaccines £9.9bn (+24% AER, +25% CER); Specialty Medicines £10.2bn (down 9% AER, 8% CER, but up 14% and 15% respectively excluding COVID-19 solutions); General Medicines £10.2bn (+1% AER, +5% CER). Arexvy generated £1.2bn in its first year and Shingrix £3.4bn. Cash capital expenditure on property, plant and equipment and intangible assets was £2.3bn. Total equity was £12.8bn.

Material changes versus the prior comparable period

• Excluding COVID-19 solutions, turnover rose 12% AER and 14% CER. COVID-19 solution sales fell to £194m from £2.4bn, materially affecting reported growth, particularly in Specialty Medicines.
• Vaccines growth was led by Arexvy’s launch and Shingrix; influenza vaccine sales fell 29% to £504m. Specialty Medicines ex-COVID growth reflected HIV, respiratory/immunology and oncology. General Medicines growth was led by Trelegy, whose sales rose 27% AER to £2.2bn.
• Adjusted operating margin increased 1.2 percentage points. Higher sales and favorable mix were partly offset by increased launch and R&D investment and higher selling, general and administration costs.
• Net debt declined £2.2bn, supported by free cash flow and £1.9bn of proceeds from investment disposals, including Haleon shares; partly offset by shareholder dividends and the Bellus acquisition.
• Comparisons of total profit with 2022 are distorted by the Consumer Healthcare demerger and related gains recorded in 2022. Continuing-operations figures are more comparable.

Outlook, commentary, risks and unusual items

Management expects another year of meaningful growth in 2024 and declared an expected 2024 dividend of 60p per share, versus 58p for 2023. The filing does not provide a clear numerical 2024 sales or profit guidance range. Management cites strong momentum, 71 vaccines and medicines in development, 18 in Phase III or registration, and plans for at least 12 major product launches from 2025. It expects Arexvy to have annual sales potential above £3bn; this is an ambition, not a guarantee.

• Legal exposure: GSK continues to vigorously defend Zantac claims. A US federal MDL ruling dismissed approximately 2,200 filed cases, but plaintiffs appealed; substantial state-court litigation, including Delaware proceedings, remained ongoing. Some California cases were confidentially settled without admission of liability. The £267m provision for legal and other disputes does not quantify potential Zantac exposure; the filing says a reliable estimate for certain disputes is not possible.
• Other litigation: In February 2024, an English appellate court ruled in GSK’s favour in the Zejula royalty dispute, reversing the prior judgment; the amount of royalties remains subject to possible further proceedings. Patent disputes with Pfizer concerning RSV vaccines are ongoing.
• ViiV obligations: The Shionogi contingent-consideration liability was £5.7bn at year-end, with £1.1bn of cash payments made in 2023. Its fair-value measurement depends materially on future sales forecasts; a 10% change in forecasts would change the liability by about £539m.
• Revenue estimation: US returns, rebates and other deductions are significant; the US Commercial Operations accrual was £6.0bn at year-end. Three wholesalers accounted for about 79% of US Commercial Operations sales, creating customer concentration risk.
• Pipeline and operating risks: Clinical, regulatory and commercial outcomes are uncertain; key risks also include product safety and quality, supply continuity, competition, pricing and reimbursement, cybersecurity, data privacy, and climate-related regulation and physical disruption. A lower-carbon Ventolin inhaler could reduce use-related emissions by about 90%, but Phase III trials were planned for 2024 and success is uncertain.
• Other notable items: GSK spent £6.2bn on R&D, up 13% AER. It sold 300m Haleon shares in January 2024 for £978m and completed the Aiolos acquisition in February 2024. The board proposed a progressive dividend policy. The audited financial statements received an unqualified opinion, and the auditor reported effective internal control over financial reporting.

Important facts for investors to verify

• Whether 2024 growth and the longer-term outlook are supported by product-level results, especially Arexvy uptake, Shingrix expansion and HIV growth.
• Progress and commercial prospects for late-stage pipeline assets, including the timing and probability of the anticipated launches from 2025.
• Developments in Zantac litigation, including appeals, Delaware proceedings, trial outcomes, settlements and any change in provisions or disclosures.
• ViiV sales performance, contingent-consideration cash payments and valuation assumptions, alongside the substantial US rebates accrual.
• Cash conversion, debt maturities, acquisition spending and the sustainability of dividends amid continued R&D and launch investment.