July 24, 2019 / 11:15 AM / in a month

GSK raises 2019 earnings expectations after standout quarter for Shingrix

(Reuters) - GlaxoSmithKline beat second quarter profit expectations with the help of strong demand for its shingles vaccine, prompting the British drugmaker to forecast a smaller fall in profit this year than originally anticipated.

The results bode well for Chief Executive Officer Emma Walmsley’s plans to rejuvenate GSK, which has included the spin off or sale of a number of businesses since she took over in 2017 and began focusing on the company’s pharmaceuticals business.

GSK now expects annual earnings for 2019 to decline by between 3% and 5%, an improvement from a previous forecast of a 5% to 9% fall at constant currency.

The new forecast reflects improved operating performance, lower interest expense and tax benefits, the company said.

Shares of the FTSE-100 member initially rose as much as 2.5% to touch more than a two-year high of 1,701.6 as Walmsley outlined “another standout quarter” for the Shingrix vaccine, with sales more than doubling.

“For at least the second quarter running, pharmaceutical sales were driven by the performance of the Shingrix vaccine in the U.S.,” Andy Smith, analyst at Edison Investment research, said.

Sales of Shingrix soared to 386 million pounds ($482 million) in the three-month period, above analysts’ expectations of 366 million pounds, due to continued strong uptake in the United States as well as demand in Germany and Canada.

Shingrix was launched in 2017 and GSK has predicted sales will be “significantly” more than 1 billion pounds in 2019.

The performance of GSK’s vaccine unit is compensating for crumbling sales of its asthma drug Advair, which faces competition from a generic version of the treatment.

Sales from Advair, which has long fueled the company’s growth, fell 31% to 412 million pounds in the quarter, missing analysts’ expectation of 438 million pounds.

GSK is also pushing deeper into cancer treatments and on Wednesday announced a collaboration with immunotherapy developer Lyell Immunopharma, which works on tumour-fighting immune cells.

The second quarter results, however, did not convince all investors and GSK’s shares rolled back to register a gain of 0.7 percent at 16.72 pounds by 1334 GMT.

“We think these are a solid set of results from GSK, however we aren’t going to get too carried away,” Charlie Huggins, manager of the HL Select UK Income Shares fund, which holds shares in GSK, said.

“Confidence in GSK’s drug pipeline is still fairly thin on the ground, and it will be some time before we know whether efforts to reinvigorate performance under new leadership have been successful.”

GSK on Wednesday appointed HSBC’s Jonathan Symonds to succeed Philip Hampton as non-executive chairman, ending a six month search as the drugmaker prepares to fold its consumer business into a joint venture with Pfizer.

Symonds was formerly finance chief at GSK rivals Novartis and AstraZeneca.

FILE PHOTO: The GlaxoSmithKline (GSK) logo on top of GSK Asia House in Singapore, March 21, 2018. REUTERS/Loriene Perera/File Photo

GSK, which earns most of its revenue from international markets, said it was ready to work with the British government under new Prime Minister Boris Johnson, but reiterated that a ‘no-deal’ exit for Britain from the European Union would be a bad outcome.

GSK's turnover rose 5% to 7.81 billion pounds in the second quarter ended June 30, compared with analysts' expectations of around 7.65 billion pounds, according to a company-compiled consensus here of 10 analysts.

Adjusted earnings were 30.5 pence per share. Analysts on average had expected earnings of 25.8 pence.

Reporting by Pushkala Aripaka and Ankur Banerjee in Bengaluru; Additional reporting by Ludwig Burger in Frankfurt; editing by Patrick Graham and Elaine Hardcastle

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