GSK's blockbuster Shingrix shot emerges from pandemic with US prescription surge

GlaxoSmithKline PLC, the world's biggest vaccine-maker, said its blockbuster Shingrix shot is emerging from the COVID-19 pandemic with U.S. first-time prescriptions jumping 73% in the second quarter.

The Brentford, U.K.-based drugmaker reported second-quarter sales of the shingles vaccine of £295 million, some 10.9% below consensus expectations. Overall vaccines were 32.4% ahead of consensus at £1.57 billion, boosted by the sales of its adjuvant — added to a vaccine to boost the immune response — during the pandemic, as well as pediatric and adolescent vaccines.

Respiratory medicines were 7% ahead of expectations and HIV sales were 3% ahead, according to Goldman Sachs analyst Keyur Parekh, who rates the company a "buy."

GSK CEO Emma Walmsley Source: GSK

GSK expects to double the sales of Shingrix, which received an additional approval July 26 from the U.S. Food and Drug Administration for immunocompromised adults, in the next five years. Demand for the shot exceeded supply before the pandemic, with additional manufacturing capacity set to come online in 2024.

"We have seen sustained impact through the first half of the year ironically because of the deployment in our biggest markets in the world — and rightly — the prioritization of COVID-19 vaccinations, so on that basis our Shingrix business ... was deprioritized," CEO Emma Walmsley told reporters on a July 28 call after the group's second-quarter results.

"We are very confident that is purely a deferral of business, as opposed to any impact on the underlying demand, but that would be why we think our overall outlook for the year ... would be flat," she said.

Walmsley was speaking to reporters after GSK unveiled forecast-beating sales in the quarter — which came in 7%, or £531 million, above consensus — boosted by strong sales of vaccines and pharmaceuticals, although these were flattered by lower rebates.

GSK has taken a number of approaches to tackle the COVID-19 pandemic, not least striking an alliance with Paris-based Sanofi to provide its adjuvant booster to an experimental vaccine, now in the final stage of trials required for regulatory approval. GSK is also working on a second-generation messenger RNA vaccine as part of a deal with CureVac NV. Opportunities for multivariant vaccines or potential flu vaccines could also emerge from this technology, the CEO said.

Earlier in the day, GSK and Vir Biotechnology Inc. announced that they will supply the EU with up to 220,000 doses of sotrovimab, a monoclonal antibody for adults and adolescents at risk of progressing to severe COVID-19 but who do not need oxygen. Results of a phase 3 trial in June showed a 79% reduction in death or hospitalization for more than 24 hours, compared to placebo.

Walmsley forecast that GSK is likely to deliver adjusted EPS at the top end of guidance, assuming improved demand for adult vaccines and a return to normal healthcare and consumer trends in key markets in the second half of the year. The company's guidance currently excludes any contribution from COVID-19 solutions, expected to add another 4%-6% to adjusted EPS in 2021.

"While Shingrix performance was as flagged weaker than the [prescription] data, a strong recovery for [other] vaccines, HIV and respiratory off a weak [second-quarter] comparison, coupled with lower [operating expenditure] made for a strong earnings beat," Citi analyst Andrew Baum said in a note.

Although full-year guidance was not raised, it is clear that there is upside potential, depending on the COVID-19 Delta variant, said Baum, who rates the stock a "neutral."

GSK announced June 23 that it intends to keep a 20% stake in the consumer business that will list on the London Stock Exchange in 2022. The cornerstone for Walmsley's vision for the "new GSK" is a merging of the vaccines and pharmaceuticals business to focus on the science of the immune system — a move the CEO predicts will bring in sales of at least £33 billion in the next decade.

Brian McNamara, who heads the consumer business, will continue in the role once the unit has been spun off.

"What shareholders want us to focus on — and we remain resolutely focused on — is execution and delivery," Walmsley said. "And that is exactly the plan, and I am pleased to say that this quarter and through this year we are making good progress on that, whether it be commercial execution or pipeline or preparation for separation."