GSK Financial Analysis

Analysis Date: 1/24/2025

Business Model

GSK generates revenue primarily through three business segments: Vaccines, Specialty Medicines, and General Medicines

Revenue Sources

• Vaccines (33% of Q3 revenue): Includes Shingrix, meningitis vaccines, Arexvy (RSV) and influenza vaccines
• Specialty Medicines (37% of Q3 revenue): Includes HIV treatments, respiratory/immunology drugs and oncology medicines
• General Medicines (30% of Q3 revenue): Includes respiratory products like Trelegy and other established medicines

Revenue Distribution by Channel

• US: 54% of Q3 revenue
• Europe: 20% of Q3 revenue
• International: 26% of Q3 revenue

Income Statement Analysis

• Revenue grew 2% at CER driven by strong Specialty Medicines growth offsetting lower Vaccines sales
• Gross margin improved 190bps (excl. COVID solutions) due to favorable product mix and pricing
• Operating profit declined 86% primarily due to £1.8B Zantac settlement charge

Balance Sheet Analysis

• Total assets decreased 1.6% primarily due to monetization of remaining Haleon stake
• Total liabilities decreased 3.5% driven by lower debt levels
• Shareholders' equity increased 5.1% reflecting retained earnings growth

Cash Flow Analysis

• Operating cash flow stable at £2.5B despite timing impacts from returns/rebates
• Free cash flow declined 20% due to higher capex including £342M CureVac payment

Capital Allocation

GSK maintains a balanced capital allocation approach focused on investment in R&D and commercial growth opportunities while returning value to shareholders through dividends. Key priorities include funding the growing pipeline, potential bolt-on acquisitions, and maintaining the progressive dividend policy with 40-60% payout ratio. Net debt reduced by £2.2B in Q3 2024 to £12.8B, supported by proceeds from Haleon stake sale.

Management Commentary

Strong momentum across Specialty Medicines driving 19% growth

11 positive Phase III trials year-to-date with 5 major launches planned for 2025

Lower Vaccines sales due to Arexvy/Shingrix headwinds

Resolution of majority of Zantac litigation removes key uncertainty

Overall Sentiment: Confident in delivering 2024 guidance and strengthened outlook through 2031, supported by commercial execution and pipeline progress

Recommendation

Rating: Buy

Reason for Rating: Strong growth trajectory in Specialty Medicines and promising pipeline potential outweigh near-term Vaccines headwinds

Disclaimer: This analysis is based on company filings and public information. It is for informational purposes only and not financial advice. Past performance does not guarantee future results. Investors should conduct their own research and consult financial advisors before making investment decisions.

Generated on: 1/24/2025, 11:43:05 AM