(Bloomberg) -- GSK Plc shares fell as weakness in its vaccines business overshadowed the British drugmaker’s raised profit forecast for the year.
The company revised its annual guidance for vaccine sales downward in a statement Wednesday. The shares dropped 1.5% as of 10:42 a.m. in London after rising 6.4% this year through Tuesday’s close.
GSK has streamlined its portfolio under Chief Executive Officer Emma Walmsley, spinning off its consumer business to shore up vaccine development. The launch of a shot for respiratory syncytial virus in the US last year saw the company secure a larger portion of the market than rival Pfizer Inc. However, expectations for the vaccine’s continued growth have been stymied by lack of a US recommendation for use of the shot in younger age groups.
Vaccine Weakness
Revenue from the RSV shot, called Arexvy, was 20% below estimates. Sales of GSK’s vaccine for shingles, Shingrix, decreased 4% in the second quarter from a year earlier, in part because of changes in how US pharmacies reimburse the shots along with challenges in reaching some potential users there, the company said. Revenue from the vaccine was 18% lower than analysts expected.
Vaccine-related upgrades could come in the second half of the year once the bulk of Arexvy sales have been booked, Shore Capital’s Sean Conroy said in a note.
Sales of shots will rise by a mid-single digit percentage this year, GSK said in the statement. The company had earlier said it expected an increase in the low-double digit percentage range.
The guidance for vaccine sales was impacted by short-term factors, Walmsley said on a call with reporters. Postponement of the decision on the RSV shot recommendation in younger age groups was a “surprise,” but GSK is optimistic about the product’s future, she said.
What Bloomberg Intelligence Says:
GSK has raised full-year sales and profit guidance by 2% at constant exchange rates, but recent foreign-exchange moves mean consensus is unlikely to improve much, and the change in product-mix expectations will raise questions over key growth vaccines Shingrix and Arexvy. GSK has reiterated peak sales guidance for both, but investors will probably focus on comments around Shingrix’s co-promotion partner in China following issues there for Merck’s Gardasil, and on Arexvy’s prospects after Pfizer unveiled an improved formulary positioning this year for rival Abrysvo.
— John Murphy, BI analyst. Read the research here.
The vaccines business is seen as central to GSK’s future growth, with the negative news outweighing the increased guidance. Earnings per share excluding some items will rise by 10% to 12%, up from the previous forecast that topped out at a 10% increase, GSK said. The raise, GSK’s second consecutive guidance boost this year, was driven by strong sales of medicines to treat HIV, cancer and lung disease.
Products that drove the forecast include Trelegy, GSK’s drug for some chronic lung diseases. New long-acting HIV medicines also contributed. The drugs have potential to change how patients both treat and prevent HIV, by only having to take an injection every few months rather than daily pills.
Adjusted earnings for the quarter were 43 pence ($0.55) a share, GSK said, while analysts had estimated 39 pence on average. Revenue of £7.88 billion came in ahead of the average view of £7.55 billion.
Litigation over whether GSK’s former heartburn medicine Zantac caused cancer has weighed heavily on its share price. Former Zantac users who have sued GSK and other producers claim the drug’s active ingredient, ranitidine, degraded and turned into a potential carcinogen called NDMA under some conditions. The companies deny these claims.
--With assistance from Lisa Pham.
(Updates with CEO comments in sixth paragraph.)
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