GSK adjusts FY2018 guidance after encouraging Q2 results

GlaxoSmithKline (GSK) has upgraded its full year (FY) 2018 guidance after recording growth in sales, margins and cash flow in its financial report for the second quarter (Q2) of 2018.

The company’s group sales increased by 4% in constant exchange rate (CER) to £7.3bn in Q2. Product sales for its pharmaceutical sub-group also increased by 1% to £4.2bn, driven by sales growth of HIV products, as well as a boost for Nucala and Ellipta.

Sales rose 16% to £1.3bn for GSK’s vaccines business due to rising sales of Shingrix in the US and an increasing demand for Hepatitis vaccines. However, this was partially offset by declines in sales for other vaccines.

The company’s consumer healthcare segment experienced a rise of 3% to £1.8bn. This was fuelled by strong performance in the oral health and skin care categories and was partially offset by slower growth in the wellness and nutrition categories.

GSK’s free cash flow reached £492m in Q2 and totalled £0.8bn for the half year, which is £400m more than the first half of 2017. The company’s total operating profit increased by more than 100% to £779m and adjusted operating profit increased by 7% to £2.1bn.

Two GSK products that performed especially well were Ellipta and Nucala, which are both in the respiratory category. Ellipta experienced 26% sales growth to £509m due to continued growth in all regions and market share gains. This was partially offset by the impact of continued pricing pressures.

Nucala experienced larger than 100% growth to £141m as the drug benefitted from its global roll-out and market growth in the US.

GSK’s revised expectations for FY stipulates that if no generic competition to Advair is launched in the US in 2018 then adjusted earnings per share (EPS) growth will be 10%; however, if a Advair generic is introduced then EPS will increase by 7%. This updated guidance reflects the successful launch of Shingrix and earnings from the buyout of Novartis’ stake in a consumer healthcare joint venture.

GSK chief executive officer Emma Walmsley said: "GSK has delivered encouraging results across the company this quarter with CER sales growth in each of our three global businesses, an improved Group operating margin, Adjusted EPS growth of 10% (CER) and stronger free cash flow.

"We are today upgrading our guidance for CER growth in adjusted earnings per share for 2018. This reflects increased sales expectations for Shingrix, the positive effect of the completed Consumer Healthcare buyout, as well as the delay of a potential generic version of Advair in the US, partly offset by the continuing pricing pressures in Respiratory. We remain increasingly confident in our ability to deliver mid to high single digit growth in Adjusted EPS CAGR 2016-2020 (at 2015 CER)."

GSK reported £7.3bn in turnover representing a 4% increase. The company performed best in the US with a 7% increase in turnover to £2.8bn, compared with a decline of 1% to £2bn in Europe and a rise of 3% across the rest of the world.

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