GlaxoSmithKline Q2 profits, revenue jump

GlaxoSmithKline said on Wednesday that it expects full-year earnings to be towards the top end of its guidance range as it reported a jump in second-quarter profit and revenues amid a recovery in the vaccines business.

Adjusted operating profit for the quarter rose 23% to £2.2bn, while total turnover was up 6% at £8.09bn. Adjusted earnings per share came in at 28.1p, beating analysts' expectations of 19.9p.

Turnover in the pharmaceuticals segment was 3% higher at £4.2bn, driven by strong growth in new and specialty products, and a prior year comparator that was impacted by the destocking of Covid-19 related first-quarter additional demand.

Vaccines turnover rose 39% to £1.6bn, driven mainly by pandemic adjuvant sales, higher demand for DTPa-containing vaccines in the US and increased demand for Bexsero in the US and Europe. Vaccine adjuvants help to create stronger immune responses.

Vaccines turnover excluding pandemic vaccines grew 16% to £1.3bn.

In consumer healthcare, which is being spun off into a separate company, turnover fell 4% to £2.3bn.

Glaxo reaffirmed its guidance for 2021 for a decline of mid to high-single digit percent adjusted earnings per share (EPS) and constant exchange rates (CER), excluding any contribution from Covid solutions.

In addition, following its "strong" Q2 performance, the company said it is likely to deliver full-year adjusted EPS towards "the better end" of its guidance range, which is for a decline of mid-to-high single-digit percentage at CER, excluding any contribution from Covid-19 solutions.

Chief executive Emma Walmsley said the group had delivered an "excellent" performance in Q2.

"We expect this positive momentum to continue through the second half of the year driving us towards the better end of our earnings guidance range for 2021, and meaningful performance improvement in 2022," she said. "We continue to strengthen our pipeline and are advancing well towards separation. Our clear priority is to focus on execution, unlocking the value of Consumer Healthcare and delivering the step-change in growth and performance we now see for GSK."

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: "The fact AstraZeneca beat GSK to a coronavirus vaccine has been a source of some discontent at the UK’s largest vaccine manufacturer. This quarter the group has finally started to put that right. Sales of its vaccine adjuvant, which helps enhance the immune response, are ramping up and a Covid treatment is also hitting pharmacies.

"It’s part of wider good news for GSK, which has seen sales of its newer drugs gather pace this quarter, helped by favourable comparators last year. Those increased sales have fed quickly though to the bottom line, boosting underlying profits.

"However, despite what is definitely progress we think GSK’s long term challenges remain unresolved. There may be more flesh on the bones of the planned Consumer Goods demerger following June’s investor update, but the group is still in limbo waiting for the separation to actually happen.

"More pressing is the still very poor levels of cash generation. Free cash flow in the first half of the year hasn’t come anywhere near covering the dividend, and as a result debt continues to mount. A dividend cut after the demerger will ease some of the pressure, as will the sale of some shares in the consumer business, but it’s yet another example of investors being promised jam tomorrow when previous promises have been rather disappointing."